The Conversion Conundrum

Can we really convert office buildings to residential uses?

People have the same great idea all the time.

I'll be chatting at a cocktail party and someone asks what I do for a living. I tell them I work as an office tenant rep.

Then they get this big smile on their face and burst forward with THE idea!

"Let's just convert all those empty office buildings to....residential!" They pat themselves on the back as if their job here is done.

Well, sorry to break it to you, pal, but the conversion of office to residential is not a panacea by any stretch.

Here's why:

1) Bay depths are all wrong. Office depths from the window line to the building core (center) are about 40 feet in most cases. Apartments are often less than half this depth. Would you want YOUR bedroom at the end of the hall with no windows?

2) The utilities are all wrong. In conversion, you will need new water and electric lines because the layout is so different. Think 2 bathrooms on a floor to 8-10 and move everything. Major expense.

3) Zoning. Yes, you may be able to get this changed, but in most of the US, the community has to approve your use first. This approval is in no way a slam dunk.

4) Math. An architect told me recently "in most cases with office to residential conversion the developer only gets two things - dirt and concrete. Everything else has to be replaced." "It's actually cheaper to tear the office building down and rebuild a purpose built residential tower."

And don't even get me started on elevators (too many in tall office buildings which takes up space and add ongoing maintenance costs).

When the cycle turns - and it WILL turn - most office buildings will be....

Office buildings.

With a lower basis and cheaper rents.