The flowers in Antarctica are starting to bloom. Humanity is on the cusp of being overtaken by AI entirely. The world is truly doing a turn of 180 and everything is starting to look strange and different. It is no surprise then that empty office spaces are being converted into apartments. The next apartment that you occupy could very well be someone’s old office cubicle.
Are office spaces being redefined?
In July, real estate data derived from Cushman & Wakefield revealed that Manhattan’s office buildings had a vacancy rate of 22.4% during the second quarter of 2023. San Francisco’s vacancy rate, as reported by CBRE, has risen to 31.8%, a significant rise from the pre-pandemic levels when startups were competing for office space. Even in central London, despite buildings being relatively fuller, there is a 9.4% vacancy rate as per the calculations of JLL; a real estate services company. This rate is nearly twice the long-term average of 5.5%.
Furthermore, even the office buildings currently in use experience uneven and irregular traffic where it may be busy and packed on Mondays but an isolated space by the end of the working week. Data from Leesman, a global workplace insights company, indicates that 74% of UL employees plan to be in the office for two days or less per week, and mid-week attendance is notably higher than on Mondays or Fridays.
The work-from-home and hybrid models which came into play because of COVID-19 are undeniably here to stay. There is no dispute around that. The traditional office routine has become less common. Several tall office buildings that employees used to visit on a daily basis are now either vacant or have significantly fewer people working in them compared to pre-pandemic times. To make things worse, most countries are currently experiencing a housing shortage as well. Therefore, the effort to restructure them and use them as living spaces arises from a need rather than a want to redefine space. But it is always important to be aware of the fact that not all urban cities consider this transformation to be viable (especially financially) and therefore they just let the empty office spaces be.
In an article titled “Turning unused office space into housing could solve 2 problems, but it is tricky”, Erin Kenney (a writer for NPR) illustrates how a few years ago, if you passed by 1313 L St. in Washington, D.C., you would have seen a typical 1980s-style office building. This building served as the headquarters for the National Association for the Education of Young Children and had a red brick exterior, large windows, and the organisation’s logo displayed quite visibly.
But now things are changing drastically. If you happen to walk by the same location a year from now, you may stumble across a newly completed apartment building instead. This transformed structure will come with modern grey siding and even a rooftop patio. This project is an apt example of a growing trend in real estate: the conversion of old and underused/unused office spaces into apartment complexes. This approach seems to be beneficial for multiple reasons, as it helps repurpose office space that was not being fully used and addresses the pressing need for additional housing in urban areas.
This concept of addressing two pressing issues (empty office spaces and housing shortage) facing many countries by bringing them together into a solution has been the talk of the town. So much so that it was brought to the table during a meeting held in January of the World Economic Forum. The property executives who were gathered there were of the opinion that vacant office spaces globally should be metamorphosed into apartments to tackle the crisis of the ever-expanding housing shortage.
Converting office spaces into residential units is not a new idea, and it has already been implemented in countries like Australia. Such conversions are relatively common in buildings that are of moderate height, typically ranging from 4 to 10 stories, but they are less frequently seen in tall high-rise office structures. In most cases, the core of office architecture does not really fit into that of a residential one.
Sydney provides a few recent instances of office-to-residential conversions that have been notably successful. One prime example is the Greenland Centre located at the intersection of Bathurst and Pitt streets, which now accommodates nearly 500 apartments. This residential tower, spanning 67 levels, ingeniously integrated the pre-existing 26-storey Water Board Building from the 1930s, transforming it into residential units. Additionally, the project involved constructing new levels on top of the existing steel and concrete structure to create a multifaceted and functional residential complex. In countries such as the U.S. and South Korea, government policies actively encourage developers to transform vacant office buildings into affordable housing. However, despite initiatives such as these already existing, this idea of converting is easier said than done, for more reasons than one.
Why is the conversion more difficult than it looks?
Transforming vacant office space into housing is definitely an attractive idea. Even the Mayor of NewYork; Eric Adams, who says that office-to-residential conversions could potentially produce 20,000 new homes, believes so. But it is rife with challenges. The main issue is the substantial financial investment needed, including labour, supply chain disruptions, and rising material costs. In an already expensive environment, converting offices to residences becomes even costlier. For example, despite San Francisco’s commercial office buildings being less occupied than they have in a long time, and with an estimated 8,000 homeless individuals in the city, the chances of vacant offices being turned into homes for people of any income level, are low to none. This is due to the fact that developers, property owners, and city officials believe that converting office spaces into residences is not financially feasible in the long term.
Moreover, bureaucratic hurdles, such as permits and regulations, add complexity. Converting office spaces often means making adjustments that don’t align perfectly with existing building codes. Cities supporting such conversions must find a balance between safety rules and innovative housing solutions that don’t fit the usual mould.
Another problem that the conversion concept may encounter is how housing and commercial spaces are poles apart, structurally. Especially, in terms of design and infrastructure needs. Residential properties usually require different plumbing, utilities, and ventilation, and must adhere to distinct zoning regulations. Taking all things into consideration, these are a few discrepancies that make the entire process quite challenging.
Empty office spaces sitting idly right in the middle of urban areas are the least attractive thing that a city could possess. No one is keen on seeing an increase in such spaces. While the conversion of these spaces to residential ones is a well-tested possibility, it will not be cheap. But, reshaping empty office spaces into housing has the potential to impact urban dynamics positively. It can lead to the development of new residential units in city centres which could attract young professionals with spending power. This influx of residents may help alleviate housing demand in other parts of the city. Additionally, the introduction of new businesses and amenities could trigger the rejuvenation of areas that were previously underutilised or neglected.
(Sandunlekha Ekanayake)