Skating Around Real Housing Challenges
(I dunno how I feel about that title. Seems a little too cute. But yolo!)
Hey Bright Builders-
This week’s post is The Bright Build’s first dive into larger trends within multifamily housing (and other issues that should be on the radar of any aspiring developer.)
Because, at the very least, someone’s going to ask you about this stuff over beers :-)
One of my daughter’s friends had a birthday party a few months ago. More specifically, a roller skating party. Picture a gaggle of eight-year-olds whipping around a room at mach speed, squealing gleefully, legs akimbo like newly born giraffes.
Only this wasn’t a roller rink. It was an empty shell of what had, up until last year last year, been a CB2.
It was a little weird roller skating in a space where I had once leisurely strolled, coffee in hand, looking for furniture.
But hey, this is 2024, and a lot has changed over the past few years. Civil unrest, the work-from-home surge, and a ton of empty storefronts.
Which is how developers like myself end up roller skating in an empty storefront.
On one hand, it was cool.
On the other hand, a persistent voice in my head kept barking:
Something’s off!
Something’s off!!!!
Maybe it was the architectural steel beams that looked cool in CB2 but, at ten miles per hour, were impending head trauma for a 2nd grader. Or it was the large plate glass windows within arm's reach. At any rate, one of the hosts kept circling the room, asking if parents had signed waivers for their kids.
He looked worried :-)
All of this is to say that while the use of the space was innovative, the space wasn’t purpose-built.
It wasn’t a real roller rink.
It was a kinda-sorta-rink.
For not-quite skating.
And as I scan the landscape and read all of these breathless articles about office conversions as the solution to our housing crisis, I have the same…. I dunno. Is the word “misgivings”?
With nearly a billion square feet of empty office space across America and a severe housing shortage, the solution seems obvious: turn those vacant offices into homes. Cities from New York to San Francisco are increasingly exploring office conversions as a silver bullet for their empty downtowns and housing crises. While office-to-residential conversions should absolutely be part of our housing strategy, my reading on recent conversion projects suggests we should have realistic our expectations about their impact on housing affordability.
The Promise
No doubt. Office conversions offer genuine advantages. They can help revitalize downtown areas that have struggled with post-pandemic vacancies. Converting existing buildings is typically more environmentally friendly than demolition and new construction. Some cities have already shown success with this approach - Philadelphia's conversion program led to 180 building conversions and a 55% increase in downtown residents.
Certain buildings, particularly pre-World War II offices, are especially well-suited for conversion. These older buildings often have higher ceilings, more windows that actually open, and narrower floor plates that allow natural light to reach most spaces. When the right building meets the right market conditions, conversions can create vibrant new housing relatively quickly.
However…and this is a BIG however that doesn’t receive enough attention…. most office buildings - especially modern ones - present significant architectural challenges for residential conversion. The fundamental issue is that offices and apartments have very different physical needs. Modern office buildings were designed for large, open floor plates with central cores of elevators and utilities.
This layout is TERRIBLE for apartments, where residents need windows, natural light, and proper ventilation in every unit.
The numbers are stark: Moody's analysis found that just 3% of New York office buildings would be viable for conversion. Many modern office buildings have floor plates that are too deep - residents don't want apartments where the living room is 50 feet from the nearest window. The mechanical systems (plumbing, HVAC, electrical) typically need to be completely overhauled for residential use. Even the windows in many modern buildings don't open, requiring expensive replacement.
The Economic Reality
Even when conversion is physically possible, the economics often don't work without significant public subsidies. According to real estate executives quoted in The New York Times, conversion costs can range from $200 to $500 per usable square foot - and that's before dealing with any surprises in the building. These high costs mean most conversions only make financial sense as luxury housing. In Manhattan, converted units typically rent for $3,000 to $7,000 monthly or sell for $3-4 million - hardly a solution to the affordable housing crisis.
The economics are further complicated by things like excess elevator capacity (office buildings have far more elevators than apartment buildings need) and the loss of rentable space to create apartments with adequate light and air. A typical office building might see 15-20% of its space become unusable in conversion.
The Way Forward
None of this means we should abandon office conversions as a strategy. They should absolutely be part of our housing solution, particularly for well-suited buildings in transit-accessible locations. But we need to be realistic: conversions alone won't solve our housing crisis.
Instead, we need a multi-pronged approach that includes:
- Converting suitable office buildings where it makes sense
- Building new housing, especially near transit
- Reforming zoning to allow more housing types in more places
- Creating financial incentives for affordable housing development
- Streamlining the approval process for both new construction and conversions
The appeal of office conversions is obvious - here in Minneapolis, we have empty offices and need housing. But the reality is more complex than the simple math suggests. Like most things in housing policy, there's no easy solution. We need to pursue office conversions as part of a broader strategy, while being realistic about their limitations.
And of course, where office conversions fall short, we need a whole bunch of new multi-family developers to jump into the market.
That means you :-)
Peace,
You probably found me through Twitter, but if not, make sure you’re following me on social media.
X: seandsweeney