There were 15.1 million vacant homes in the United States in 2022, according to the Census Bureau.
These vacant homes, including rentals, represent 10.5% of the country’s total housing capacity. While there may be enough places to live, not all of them are up to code, safe, or remotely usable. Many of these vacancies exist in places that are experiencing low growth rates. However, cities are booming, with many opting to live in the city for convenience, if they can afford to. This has led more developers to seek unique ways to fit more people into spaces that were not designed as homes. One unique option represents itself in vacant office spaces, providing spaces for those looking to live in heavily populated areas where housing is scarce.
Is this trend a fleeting response to current circumstances, or could it bring in the next construction boom?
The Driving Forces Behind Office-to-Apartment Conversions
Changing Work Patterns
One of the most significant drivers for converting office spaces into apartments is the shift in work patterns. Remote work, initially a temporary solution during the pandemic, has proven effective and, in many cases, more productive. According to the Pew Research Center, around 22 million employed adults in the U.S. (14% of the population) work from home full-time. Additionally, over one-third of workers who can work remotely do so, with 41% in a hybrid setup. It’s estimated that more than 1 in 5 American adults will work remotely by 2025. Upwork’s Future of Remote Work study highlights increased productivity in remote settings, with one-third of hiring managers reporting productivity boosts. Offering remote or hybrid work can also improve employee retention. Owl Labs' State of Hybrid Work 2023 survey found that 26% of full-time office workers changed jobs in 2023, compared to only 17% of hybrid or remote workers. Moreover, companies benefit from reduced overhead costs by downsizing physical office spaces. This has left many office buildings underutilized, making them ideal candidates for conversion into residential properties.
Urban Housing Shortage
While there isn’t a general housing shortage, there is a significant shortage of affordable housing, particularly in urban areas. There are only 7 million affordable units for 11 million households with extremely low incomes, creating a nationwide affordable housing crisis for this demographic. However, for other income groups, there are enough affordable rental units to meet demand.
Converting office buildings into apartments through adaptive reuse offers a practical solution to quickly increase the housing stock. This approach repurposes existing structures, reducing the need for new land development and construction, which can be both time-consuming and environmentally taxing. Additionally, it saves money for developers and new property owners. These converted units are often smaller and less expensive than large, design-build luxury apartments.
Cities like New York, Boston, and Cleveland are embracing adaptive reuse. The Biden Administration is also supporting this trend with federal programs and tax breaks. Currently, there is more vacant office space than at any point since 1979. However, this solution is not without challenges. There are several hurdles to overcome before office space conversions can significantly impact the housing market.
Economic Viability
From a financial perspective, converting office buildings into apartments can be more cost-effective than constructing new residential buildings from scratch. Office buildings, especially those in prime locations, often have robust infrastructure and are already connected to essential utilities. Converting these existing structures can be cheaper and quicker than building from the ground up, even for older buildings that require significant updates. For example, smaller pre-war buildings with natural light can be up to 30% cheaper to convert than to build new. A report from the Urban Land Institute and National Multifamily Housing Council indicates that conversion projects can be completed six to twelve months faster than constructing similar properties from scratch.
The framework of adaptive reuse can significantly reduce construction costs. Additionally, potential tax breaks and the ability to create many rental units within a single building attract investors. This trend has gained momentum, with developers converting over 110,000 apartments from outdated hotels, office buildings, and other structures post-COVID. Currently, more than 58,000 apartments are being converted from office buildings.
While these conversions are often profitable and efficient, they typically require utility work. Many of the buildings are older and need new as-builts, concrete scans, and utility locating services to ensure smooth project completion. SiteMap® (patent pending), powered by GPRS, provides a simple way to visualize your data, both above and below ground. With SiteMap®, you can view your subsurface data, GPRS-backed as-builts, and floor plans. This allows stakeholders to:
- Visualize a space before it’s completed
- Make changes in the early stages without extra cost or hassle
- Invite others to collaborate with the project simply, providing a comprehensive examination and eliminating information bottlenecks
- Ensure that utility hookups and tie-ins are safe and operational
- Check historical data against current data
- Meet regulatory demands
- Identify issues before they become a catastrophe
- Walk through the site before completion, digitally
- And more!
With GPRS’ suite of visualization options, stakeholders can even virtually walk through a building before its completion, allowing them to gain public approval, make changes, develop marketing materials, and more. WalkThru 3D allows you to remotely report existing reality capture to stakeholders, managers, contractors, and trades, so that they can walk through the site at their own pace. And, because it is delivered via SiteMap®, you can even digitally measure inside the image to help plan and design better. GPRS helps you Intelligently Visualize The Built World®, one project at a time.
The Challenges of Office-to-Apartment Conversions
While adaptive reuse to apartments offers numerous benefits, there are still many challenges. Several factors need to be considered to ensure successful conversions, such as:
Zoning and Regulatory Hurdles
One of the main challenges is navigating the complex terrain of zoning laws and regulations. These regulations, while straightforward in principle, designate buildings for specific uses such as residential or commercial. Established largely post-World War II, these laws allowed for the separation of living and working spaces. Many office buildings are situated in areas zoned exclusively for commercial use. Changing these designations to residential use requires approval from local authorities, a process that can be lengthy and bureaucratic. Moreover, building codes for residential spaces are often more stringent than those for commercial properties, requiring extensive renovations to meet safety and habitability standards.
Brett Theodos, a senior fellow with the Metropolitan Housing and Communities Policy Center, notes that “zoning is a speed bump.” He adds, “But mayors are tripping over themselves trying to remove that problem. They are trying very hard to make their downtowns viable, and this is something they can do.”
Cities also face concerns about tax revenue implications. A significant portion of revenue comes from commercial property taxes. Most cities can’t afford to lose the tax base of large office buildings. Unfortunately, even a fully occupied apartment building generates less tax revenue than an office building due to lower density use. This means fewer people on the streets, fewer customers for lunch spots, and, consequently, less tax revenue.
Structural and Design Considerations
Office buildings are designed with different structural and spatial considerations than residential buildings. For example, office floors are typically larger and have fewer partitions compared to apartment units. Converting these spaces into functional and aesthetically pleasing living quarters requires creative architectural solutions. This often involves significant interior reconfiguration, such as adding plumbing and electrical systems for kitchens and bathrooms and ensuring adequate natural light and ventilation. According to some estimates, only 3% of New York City office buildings and 2% in downtown Denver are suitable for residential conversions.
This is where SiteMap® can simplify the conversion process. When professionals can remotely view the building, ensure compliance, and avoid excess dangers, it can reduce regulatory delays. Digital twins and site visualization frequently help developers accurately plan and execute projects, particularly those requiring meticulous planning and attention to detail.
Financial Risk and Market Demand
Despite the potential for high returns, inherent financial risks are present in any real estate development project. Developers must conduct thorough market research to ensure there is sufficient demand for residential units in the area. Economic downturns, changes in housing market trends, or shifts in population dynamics can all affect the viability of these projects. Additionally, the initial investment required for conversion can be substantial, and securing financing may be challenging. This is especially true if the building isn’t ideally suited for conversion, with large floor plans and significant potential changes needed. According to the CBRE Group, costs for certain physical changes can range from $100 to over $500 per square foot, depending on the building design. This necessitates greater risk and investment, which some developers and stakeholders may be unwilling to undertake.
Opportunities and Benefits of Office-to-Apartment Conversions
Despite the challenges, the benefits and opportunities presented by office-to-apartment conversions and adaptive reuse are substantial.
Revitalizing Urban Centers
Many urban centers have been losing vitality, partly due to the reduced demand for office spaces. Converting these spaces into residential apartments can revitalize these areas. Increased residential occupancy can boost local businesses, such as restaurants, retail stores, and entertainment venues, creating a more vibrant and dynamic urban environment. Increasing the number of office-to-residential conversions also leads to more mixed-use spaces in downtown areas, making them more resilient to future changes. This process enhances safety as utilities are continually mapped, renovated, and made available to a larger population. GPRS, with a 99.8% accuracy rating across over 400,000 jobs nationwide, combined with SiteMap®, provides precise and accurate visualizations.
Environmental Sustainability
From an environmental standpoint, repurposing existing buildings is more sustainable than new construction. It reduces the need for raw materials and minimizes construction waste, resulting in a smaller carbon footprint compared to new housing projects. For instance, reusing concrete alone can prevent the release of millions of pounds of carbon dioxide per building. Additionally, many older office buildings are situated in central areas with established public transportation networks, promoting sustainable urban living and reducing reliance on cars.
Addressing Housing Shortages
The most significant benefit is the potential to address the housing shortage crisis. By converting underutilized office spaces into residential units, cities can rapidly increase their housing stock. This is especially crucial in densely populated urban areas where land for new development is scarce. Affordable housing options can be created in prime locations, giving more people the opportunity to live close to their workplaces and essential services.
Case Studies: Successful Office-to-Apartment Conversions
There is a great potential for these spaces, just as we’ve seen in these cases below:
The Equitable Building, Atlanta
The Equitable Building in Atlanta, originally constructed as an office building in 1968, was recently transformed into residential apartments. The conversion project involved redesigning the interior layout to create over 300 modern apartments while preserving the building’s iconic exterior. This project provided much-needed housing in downtown Atlanta while also preserving a piece of the city’s architectural heritage.
100 Van Ness, San Francisco
In San Francisco, the former AAA office building at 100 Van Ness was converted into 418 luxury apartments. The building’s transformation included adding residential amenities such as a rooftop garden, fitness center, and lounge areas. This project showcased how office-to-apartment conversions could cater to high-end markets, offering luxurious urban living spaces with stunning city views.
The Old Post Office, Chicago
Chicago’s Old Post Office is a massive Art Deco building, which had been vacant for decades before being transformed into a mixed-use development. The project included converting parts of the building into residential units while retaining commercial spaces. This adaptive reuse project managed to uniquely provide new housing while creating somewhat of a vibrant mixed-use community, blending residential, commercial, and recreational spaces.
The conversion of office spaces into apartments represents a significant shift in the real estate and construction industry. With a huge homeless crisis, and another affordable housing crisis, becoming creative will be the saving solution and ultimate answer to many housing issues within the nation. SiteMap® helps visualize these projects in stunning accuracy and detail, seeing stakeholders, construction teams, and other professionals throughout the project lifecycle, from planning to move-in day. Backed by GPRS’ elite team of Project Managers, SiteMap® is here to help you Intelligently Visualize The Built World®, as you build it.
GPRS’ SiteMap® team members are currently scheduling live, personal SiteMap® demonstrations. Click below to schedule your demo today!
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