According to a recent report from the Wall Street Journal, the high cost of acquiring an office building for conversion into residential use has hindered many potential projects. However, with record-high office vacancies and more sellers willing to negotiate on prices, this trend is beginning to change.
The WSJ reports that values for average or below-average buildings in less desirable locations have dropped significantly, making them more financially feasible for conversion projects. As a result, there has been an increase in completed conversions this year compared to last year.
CBRE data shows that 73 U.S. conversion projects have been completed so far this year and another 309 are either planned or underway. The majority of these conversions are from office spaces into residential units.
Julie Whelan of CBRE believes that the pipeline will continue to replenish itself as more opportunities arise due to current market conditions. One notable example is GFP Real Estate and Metro Lofts’ project at 25 Water St., which will convert over 1,300 units from an office space into residential apartments in Lower Manhattan.
