According to a recent report by the Wall Street Journal, the high cost of acquiring an office building for conversion into residential use has hindered many potential projects from moving forward. However, with record-high office vacancies and sellers becoming more willing to negotiate prices, this trend is now changing.
The WSJ reports that values have significantly dropped for average buildings in less desirable locations, making them more financially feasible for conversion projects. In fact, there have been 73 completed conversions in the US so far this year and another 309 are currently planned or underway – with about three-quarters of these being office-to-residential conversions. This adds up to approximately 38,000 units in development according to CBRE data.
Julie Whelan from CBRE states that “the pipeline keeps replenishing itself,” indicating a growing interest and momentum behind these types of projects. 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 located in Lower Manhattan.
Overall, it seems that finally we are seeing a surge in successful office-to-residential conversions as market conditions become more favorable for developers looking to repurpose underutilized properties.
