Weighing in on Mayor Wu's Residential Conversion Program for Downtown Offices

Boston Planning & Development Agency (BPDA) contracted HR&A Advisors to study the opportunities of converting office space in Downtown to residential, life science, and hospitality spaces. Pretty cool findings...

The study finds office space in the Financial District as most suitable for conversions. Why?

• It has the largest office submarket in Boston.
• Conversely, the Financial District has the smallest residential submarket, with only 875 units, in contrast to 2,000 in Chinatown/Seaport + approximately 5,000 in Back Bay.
• Surprisingly, the Financial District comprises merely 14 residential buildings.
• Seaport and Back Bay are outperforming in terms of office building class + neighborhood amenities.?
• Count of buildings in study area

• Hotels are rebounding, but still licking their wounds from COVID. Business travel hasn't fully recovered to pre-pandemic levels which is impacting their performance.
• Life Science/lab market has been hitting the brakes since 2022 Q3 with increasing vacancy + slower absorption. Office to lab conversions, unlikely viable in the study area until market conditions improve.
• Floor plates up to 100ft wide are suitable for residential + hotel.
• The study identified 6 building typologies with floorplate width and linked them to conversion use:

• Conversions broadly tend to not be feasible in the North Station submarket due to comparatively lower rents.
• The cost of hotel conversions is higher than resi. Coupled with lower floorplate efficiency + decreased business travel this makes hotel conversions harder to pencil.
• Lab conversions costs dwarf the other uses due to expensive fit-outs. Coupled with sector headwinds (i.e. depressed demand) this proposition is even more challenging.?

Green building standards, affordability requirements + linkage fees can burden a project, but incentives can be offered to balance it out.?Such as:

• Tax abatement: eliminating or reducing property taxes (the heaviest line item on a pro forma’s NOI)
• Historic tax credits (if applicable) can help with gap financing.
• Expedited permitting process

Finally, the study recommends some thresholds for a successful office to residential conversion based on physical attributes, building performance and regulatory requirements.?

Factors impacting the conversion thesis….

This article is an analysis and commentary based on the final draft report titled "Plan: Downtown" published by The Boston Planning & Development Agency on August 21, 2023.