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By Roger K. Lewis April 3, 2021 at 10:59 a.m. EDT
Life during the coronavirus has been abnormal for most of us. But even as the pandemic ebbs, a new “normal” inevitably will replace some of the old “normal,” especially in the office building real estate market. Many Americans are buying desks to work at home, suggesting that millions of square feet of previously leased space in existing office buildings may no longer be needed.
This could be a problem-solving opportunity in the future if excess commercial office space can be converted into housing, with some being affordable. But accomplishing conversion feasibly has challenges in design, technology, regulations, and costs and financing.
The pandemic has revealed that, whether by necessity or choice, some people can work productively and collaboratively yet without being in the same space. This possibility was predicted years ago by real estate developer Jay Hellman, who dubbed it “virtual adjacency.”
Internet-based communication technologies enable an individual, sitting at her or his personal computer, to interact with other individuals; host or attend meetings involving scores of people; make or observe visual presentations; and listen to lectures or participate in webinars. American firms and organizations now realize that many of their employees need to be in the office only part of the week, working at “hot desks” shared with other employees on other days.
Reduced demand for leased office space will reduce an office building’s market value, which depends entirely on leasing revenue. For office building owners, equity investors and lenders, this is disastrous, prospectively a path to insolvency and foreclosures.
Especially vulnerable are aging, deteriorating or functionally and technologically obsolete office buildings; buildings in overbuilt areas or neighborhoods with falling real estate values and rising vacancy rates; and buildings far from public transit. Yet often, the existing structural bones, and sometimes the skins and roofs of such buildings, can be saved and repurposed for housing.
Some buildings could even be adapted to a mixed-use conversion approach, with one portion of a building preserved for offices and residential units occupying the remaining portion. But no matter which conversion strategy is pursued, significant hurdles must be overcome.
Design and technical hurdles stem from geometric differences between what works architecturally for an office building vs. an apartment building. Office building floor plates are typically large and deep to provide layout and partitioning flexibility, with sizable dimensions between exterior walls and central circulation cores.
By contrast, multistory apartment buildings are proportioned to enable living/dining rooms and bedrooms to abut window walls. The length of a conventional, rectangular apartment building with units on both sides of a corridor can be whatever the building site allows, even hundreds of feet. But the building width is typically 60 to 65 feet. Kitchens, bathrooms, closets, utility rooms and, for two-level units, interior stairs abut windowless corridor walls.
Because much office building square footage is far from exterior walls, conversion to housing may require modifying the basic building structure. For example, parts of the roof and floor plates on upper levels might be cut open to create interior, skylit, mini-courtyards to bring light into habitable and interior rooms. And unique apartment layouts are often needed to effectively use available floor space.
Additional structural surgery provides vertically aligned floor openings for stairways and fire-protected exits, elevators shafts and chases accommodating plumbing and HVAC ductwork. Also, new roofing, windows, exterior cladding and insulation are usually necessary.
Fortunately, office building floor-to-floor dimensions typically exceed apartment building floor-to-floor dimensions. This is aesthetically and technically beneficial for housing conversion. Increased room heights augment the sense of space and openness while allowing natural light to penetrate farther into the apartment. And the extra dimension enables provision of space between the hung apartment ceiling and floor structure above for sprinkler pipes, electrical conduits, light fixtures and air ducts.
Zoning regulations and building code constraints add another hurdle for office-to-housing conversion. Requirements concerning fire and smoke protection, egress paths of travel, access to natural light and ventilation, and occupancy are written for conventional buildings. Yet building conversions are never conventional, making variances, special exceptions or even regulatory amendments a necessity.
Every aspect of conversion work described above entails great expense, to which must be added the underlying acquisition cost and market value of the basic building structure and land on which it sits. So saving money is not the predominant justification for converting office buildings to housing.
Rather, conversion accomplishes worthy social and environmental goals while providing office building owners the possibility of staying financially solvent.
Thus, the most daunting office-to-housing conversion hurdle is financing to cover the array of costs. Private sector equity and debt financing sources exist to finance market-rate housing units.
But subsidy funds for affordable, below-market-rate units must come from public sector sources: the federal government; state and local governments; and nonprofit housing trusts. This is why subsidy financing for converting office buildings to housing will be the greatest challenge by far.
Roger K. Lewis is a retired practicing architect and a professor emeritus of architecture at the University of Maryland at College Park.
