Breathing New life into Old Office Buildings

Converting Older Office Buildings into Residential Housing

As the sun rises on NY City, its skyline dominated by the massive skyscrapers that seemed to reach beyond the horizon and touch the clouds, many of the owners of these monuments to human ingenuity are faced with a dilemma. As people bustled around the city, going about their daily lives without ever pausing to wonder how long these structures might last. Little do they know that many of these buildings would be standing for centuries, and some will outlast them all.

The Empire State Building is perhaps the most remarkable of them all--it represents the crossing of the Rubicon as no other Skyscraper after it was ever constructed the same. The Empire State Building is a true testament to human ingenuity and resilience. Built in 1931 in record time and at the start of the Great Depression, it has been through several renovations and retrofits over the years, transforming into something new with each passing decade. Even when faced with decay and neglect engineers found ways to keep it standing prouder than ever defying time itself.

It’s not just the Empire State Building: Every skyscraper and office building has gone or will be going through several rounds of renovation and retrofitting before eventually reaching its end-of-life stage. Even in places that people took for granted like Detroit, Chicago, or Calgary, well built structures have undergone extensive revamps so they could continue on their life cycle in a more efficient manner.

As time and technology move on, it’s became clear that these skyscrapers are not disposable objects like so much else; rather, they were capable of lasting for centuries, (by some estimates quality Skyscrapers built after the Empire State Building could last 7,000 years) ?if given proper care and attention. It seemed almost magical to think that mankind could create something permanent—something that would stand despite everything else changing around it—and yet here we were looking up at magnificent structures bustling with life.

When Real Change Comes, it Comes Suddenly

With the rapidly changing economy and the rise of remote working, many older office buildings have become vacant. As a result, owners of these vacant office buildings have reached the same conclusion: it’s time to renovate and repurpose them, and most have concluded that the best course of action is to convert to residential housing.

The most obvious benefit of converting an older office building into residential housing is that it opens up a new market for renters and buyers alike. With residential rental prices at all time highs in many cities across the country, converting an older building with high vacancy rates into apartments or condominiums is one way to alleviate the shortage of housing that is North American wide. Additionally, there can be numerous tax benefits associated with such conversions, depending on local, state / province, and federally available programs.

For example, some local governments offer tax and other incentives for those who convert an office building into housing, not to mention subsides for bringing older buildings up to current environment and code standards around heating and cooling systems.

Another benefit of conversion is that it can help preserve historic architecture and character of a city, not to mention revitalizing the area and presenting new business opportunities. By repurposing old office buildings instead of tearing them down, cities can maintain their unique identity while also providing much-needed housing for its residents. Furthermore, by utilizing existing infrastructure within the building like elevators, parking structures, and deep services, owners can save on renovation costs compared to if they were starting from scratch with a new build project.

The Trend is Evident:

This trend is being driven by a variety of factors including changing demographics, the rise in remote work, and the growth of the digital economy. What does this mean for Real Estate Investment Trusts (REITs), office building owners, pension fund managers, bankers, and investors, all who are experiencing a dramatic down turn in office building valuations.

As people live longer and healthier lives there is an increased demand for senior living options that can accommodate their needs. Additionally, urban centers have become increasingly attractive places to live thanks to their amenities and proximity to jobs, entertainment venues, and public transportation. These two trends have created an environment in which repurposing office buildings can be economically viable.

For REITs, pension funds managers, bankers, and investors looking for opportunities in real estate markets that are ripe for investment opportunities repurposing older office buildings into residential housing can provide a great source of income potential over the long term. The key is finding the right opportunity with potential tenants who will be willing to pay market rates or higher rents over time while also providing stability through long-term leases or other contractual arrangements that protect against market fluctuations or tenant turnovers. Additionally, there may also be tax incentives available from local governments that could further increase returns on investments made in these types of projects so it’s important to research any applicable regulations before taking action.

The Conversion Process isn’t Easy

If you’re thinking about converting your vacant office building into residential housing, there are several steps you should take in order to ensure a successful transition, both financially and the finished product. First and foremost look to see if the municipality, or other levels of government are offering incentives and have programs in place, or are in the process of bringing in such programs. The City of Calgary, Alberta is the farthest along with its conversion programing in North America, aiming to convert 6 million sq. ft. of unused office space by offering grants that in the end could total $450 million CAD.

Of course, the building is going to need to be brought up to code as far as safety regulations are concerned – especially if you plan on renting out units individually or as part of a larger complex. You should also assess whether any renovations need to be done in order to make your building more livable – like installing new upgraded HVAC and building management systems (Grants are also available in many jurisdictions across the US and Canada for HVAC upgrades). Adding fire rated walls, soundproofing between units, new plumbing and electrical systems, there is a lot of reworking a building from an office to new residences.

Will adding facilities such as a Gym or Pool help attract tenants – and factor those costs into your budget accordingly. Basically, you’re looking at stripping the building of its interior, reworking all the perinate systems, and rebuilding an entirely new floor plate from carpet to ceiling.

Conclusion:?

Converting an older office building into residential housing offers numerous outstanding benefits including cost savings on construction costs, tax incentives from local governments, preservation of architectural character in cities, and access to rental markets or sales opportunities. If you are considering converting your vacant office space into homes or apartments, then make sure you consider all the necessary steps involved with such an undertaking like verifying compliance and adhering to local zoning regulations before getting started!

Ultimately repurposing old office buildings into residential housing is going to come down to some big players such as REITs, office building owners, pension fund managers, bankers and investors alike. Most importantly, it is the effected municipalities to take a page out of the City of Calgary’s play book and make the effort to save our inner cities from becoming hollowed out and crime infested.

New residencies in place of empty office buildings provide stability to downtown communities by creating job opportunities through construction; increasing property values and the tax base; generating new business activity; and even receiving tax incentives from local governments if population targets are met. With all these benefits combined with changing demographics; advances in technology creating more remote work from home options; and shifts in consumer behavior brought about by digital commerce—it’s no wonder why more building owners are turning towards this option, it’s a win win for all involved, especially our beautiful older office buildings. ??

About the Author: Doug Hayden has over 20 years experience is the sale and marketing of residential and commercial properties. He has recently moved back into a Business Development Role in Converting unused office Space to Residential Housing. Fell free to reach out at [email protected]