Perspectives July 27, 2023

Cubicles to Studios: Repositioning Offices into Residential Communities

By Robert Brown, Derek Johnson, and Colline Hernandez-Ayala

The COVID-19 pandemic radically changed how we live, work, and play, affecting every sector of our economy. In real estate, the office buildings which dominate our urban and suburban experience are now challenged with vacancy rates of 20-50% as companies engage in more hybrid work and reduce their physical footprints.

At the same time, many cities and towns are struggling to provide sufficient housing to meet demand, with vacancy rates running at or below 4%. With employees now spending more time working at home, there is also a need to create more spaces for work at home such as coworking amenities with meeting rooms for quiet work or collaborative efforts.

Given this shift in the demand for housing and an overabundance of unused office space, is it feasible that we could transform office buildings into residential communities? To begin, we need to determine if a residential apartment can fit within an existing office building in an efficient and cost-effective way.

Furthermore, this transformation depends on the specific dimensions of the building, the ability to obtain financing and the support of adjacent communities to embrace the kind of change.

So, let’s look at some of these key issues more carefully.

95 Berkeley Street offers high ceiling heights and oversized windows creating an abundance of “light and air” as well as a below-grade parking structure.

Location, Location, Location

Selecting the right site means ensuring appropriate parking, a visionary amenities package, desirable views, and convenient transportation. In suburban neighborhoods, office projects require 3 cars per 1,000 square feet, whereas residential projects are more likely to require 1-1.5 cars per 1,000 square feet. By reducing space for on-site parking, we can dedicate more land and create more opportunities to develop a desirable and bucolic amenity program for residential tenants. If local zoning codes allow, there is also potential to add new ground-up housing in addition to the repositioned residential product, which adds real value to the location.

For urban sites, proximity to transportation, parks, coastline, retail, historic elements, and other urban amenities are key. Many of the Northeast’s mill buildings have proved ideal for residential conversion and are at a scale that makes for good urban communities. Some successful examples include Boston’s Fort Point Channel, Lowell, and Newburyport, which have each transformed commercial and industrial environments into lively residential communities.

Does Residential Fit?

Perhaps the biggest challenge to a successful transformation is fitting residential units into the open space typical of most offices. Office buildings with floor-to-floor heights of +/- 12’ and a structural grid of 25-35’ are ideal for residential layouts due to standard unit sizing. Challenges in fitting residential layouts arise with office plates that have a depth of 40-60’ from the core to the exterior wall. If we add an internal den or a balcony to the residential unit, the core-to-exterior wall can be increased, yielding a closer core-to-wall dimension for residential units. The remaining excess dimension space could be used as additional amenity space, however this amount of amenity space would be extraordinary and not typical. Similarly, if this excess area was incorporated into the residential unit, this would increase unit size beyond a typical market rate apartment.

95 Berkeley Street, Office to Housing Conversion Floor Plan

When Was the Building Built?

When we look at the age and era of construction of urban or suburban office buildings, buildings from the mill era of the 1890s to the 1930s, typically have smaller core-to-wall dimensions of 25-35’. Buildings of the 1970-1980s have dimensions closer to 40-50’ and most recent Class A buildings are often 60’ deep. This suggests that the older, smaller office buildings are more likely to be good candidates for residential repositioning.

Commercial Building Conversion, Dallas, Texas

What’s the Architectural Character?

Mill buildings and early 20^th century buildings, with their distinct architectural character, have been very successfully repositioned into residential buildings. Late 20^th century buildings, whether in the suburbs or urban core, may require more in-depth and creative design to give them a more residential and human scale. Ground floors, entries, and amenity spaces present opportunities to alter the design towards a more residential feel. However, for the office buildings of the 70s and 80s, removing the exterior skin to transform the building from its strip window office character to a more residential façade, although enticing, may not result in an economically viable project.

Can We Finance the Repositioning?

The largest challenge in this market is financing the deal. Currently, there are so many factors that are working against success. Construction pricing is running high at $350-500 per square foot. Many communities are not in favor of gaining multi-family housing projects as their neighbors. Though governments understand the need for additional housing, they often burden projects by requiring an additional 10%-25% to be of the project to be affordable housing, which makes financing the deals almost impossible. Tax credits, opportunity zoning, and other government sponsored programs can ease some of the burden, but without these initiatives housing projects are likely to remain unprofitable and unrealized.

What’s at Stake?

There is a critical housing shortage in the US, and we need to explore every avenue to bring more housing online quickly, inexpensively, and equitably.

We also need to protect the character of our vibrant cities. Vacant or partially full buildings result in empty streets, with less retail and a lost sense of community. Additional housing in our cities and suburbs creates a more dynamic, 24/7 mixed-use environment.

In addition, the most sustainable projects are ones that seek to preserve and reposition buildings for new uses. Preservation and repositioning reduce our carbon footprint, eliminate costly demolition, and work towards a more resilient and sustainable community.

We need to work towards a feasible way to repurpose these aging buildings. Our economy, our communities, and our new way of life are calling for it.

Summary

Though there is no clear repositioning pattern for every office building, it is incumbent upon the design and construction professions along with our developer partners to work towards a feasible way to convert these buildings. Equally important is the need to create a financial model that, with support from the government, creates affordable housing programs within our communities.

So, what are the game changers?

Look for buildings in great locations.
Review the ability to fit residential units into office buildings.
Examine building age and era of construction.
Find creative solutions to spark a residential architectural feel.
Run early financial models.
Work with city and town officials to speed up approvals process and lessen costly regulation.
Seek tax credits or bonuses to offset challenging construction costs.
Be a trailblazer working towards success.

Cubicles to Studios: Repositioning Offices into Residential Communities

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