Adaptive Reuse No Magic Wand for Post-Pandemic Real Estate Woes

Pre-pandemic housing crisis, meet the post-pandemic office vacancy crisis.

2 minute read

December 27, 2022, 8:00 AM PST

By James Brasuell @CasualBrasuell

The opportunity for adaptive reuse to overhaul downtowns and commercial corridors for a post-pandemic future by converting vacant office and commercial uses to sorely needed housing is well documented—and communities have taken notice. From Chattanooga to San Francisco to D.C. to San Antonio to Maine to Philadelphia and Pittsburgh, adaptive reuse is more popular than ever.

But, experts warn, it won’t be that easy to convert every vacant office building into housing. A paywalled article by Michelle Chang for Quartz is the latest to explain why adaptive reuse isn’t a mutually beneficial silver bullet for the post-pandemic recovery and the pre-and-post-pandemic housing affordable crisis.

Despite picking up the adaptive reuse pace considerably, the net result still isn’t much compared to the scale of the problem. “So while the number of office-to-apartment conversions in the US is expected to more than double, from 11 this year to 34 in 2023, according to CBRE, that’s a tiny portion of the overall office market, which includes both large office towers and smaller developments. The 89 total housing conversions Morin’s company has identified since 2016 amount to fewer than 15,000 units,” writes Chang.

As it tuns out, office-to-residential conversions are quite expensive, which makes these projects cost prohibitive in many cases and also ensures that completed projects are only available at the high of the market—where there is considerably less demand than at lower ends of the market.

“Then there’s just the very act of turning large office floors into multiple livable spaces. Each apartment unit needs windows and light (not to mention plumbing) to turn these buildings into desirable places to live, forcing developers to gut the inside of massive office buildings,” writes Chang.

Chang also notes that so far government incentives for adaptive reuse are helping build momentum for the cause. “For example, office-to-residential projects are moving ahead in so-called opportunity zones, where investors can receive tax benefits. In some places, other tax credits, such as historical preservation tax credits or national tax credits, also help developers profitably turn offices into apartments.” More incentives that similarly lower the price of these conversions could continue to build on the momentum of early efforts, according to the article.

Wednesday, December 21, 2022 in Quartz

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