Office-to-multifamily conversions have been a popular topic of discussion and analysis, with many weighing the pros and cons of such actions. In their paper “Converting Brown Office to Green Apartments,” authors Arpit Gupta, Candy Martinez, and Stijn Van Nieuwerburgh explore the potential for these conversions while also acknowledging that only a small percentage of urban buildings may be suitable for this type of transformation.
One major benefit often cited in favor of office-to-apartment conversions is the potential to address housing affordability and scarcity issues. With continued slow demand for commercial office space, climate change hazards looming on the horizon, and ongoing “urban doom loops” caused by underutilization of offices leading to decreases in retail sales as well as lower property taxes – it’s clear that there are significant advantages to converting brown offices into green apartments.
However, not all office buildings are feasible candidates for this type of conversion. The authors developed an algorithm focused on identifying suitable properties based on factors such as location (midtown or downtown Manhattan), age (built before 1990), quality (lower than average), size (larger than 25k square feet) floor plate depth (shallow), existing long-term leases or lack thereof – resulting in a national sample size totaling over 2k properties representing approximately 11%of all high-density urban area offices at around 214 million square feet.
The authors also consider additional factors like projected IRRs when determining feasibility from a developer’s perspective – projecting an impressive IRR rate above sixteen percent. However,the success rate would likely increase if local municipalities offered zoning flexibility along with direct subsidies while federal support through renewable energy tax credits could further incentivize affordable housing developments within these converted spaces.”The surge in remote work has presented policymakers with both challenges but also unique opportunities,” explaintheauthors.”This presents them with an unprecedented chance to investin future urban environments.”
In conclusion,it appears that brown-office-to-green-apartment conversions are not only feasible but also present a unique opportunity for developers and policymakers alike to create sustainable, affordable housing in urban areas.
