NEW YORK (AP) — On the 31st floor of what was once a towering office building in midtown Manhattan, construction workers have laid steel braces for what will soon anchor a host of residential amenities: a station catering, a living room, a fireplace and gas grills.
The building, empty since 2021, is being converted into 588 market-priced rental apartments that will house around 1,000 people. “We’re taking a vacant building and bringing not just that building, but this whole neighborhood to life,” said Joey Chelli, managing director of real estate firm Vanbarton Group, which is doing the conversion.
Across the country, office-to-housing conversions are being seen as a potential lifeline for struggling downtown business districts that have emptied out during the pandemic and may never fully recover. The conversion push is marked by the focus on affordability. Several cities are offering serious tax breaks to developers to encourage office-to-housing conversions – provided a certain percentage of apartments are offered at affordable below-market prices.
In January, Pittsburgh announced it was accepting proposals to produce more affordable housing through the “conversion of fallow and underutilized office space.” Boston released a plan in October to revitalize downtown that included a push for more housing, some of which would come from office conversions. And Seattle launched a competition in April for downtown building owners and design firms to submit conversion ideas.
In the nation’s capital, Mayor Muriel Bowser has made office-to-housing conversions the cornerstone of her plan to repopulate and revitalize the neighborhood’s downtown. Its “return plan” for the capital, announced earlier this year, aims to add 15,000 new residents to the city centre, adding to the roughly 25,000 who already live here.
Bowser’s administration says about 1 million square feet of downtown real estate is already being transitioned from commercial to residential. But the city needs another 6 million square feet of conversions to meet its goal of 15,000 new downtown residents.
“We’re not going to have as many workers downtown as we did before the pandemic,” Bowser said earlier this year. “Our job is to make sure we bring more people downtown.”
But the conversion push has some skeptics. Housing advocates fear that affordable housing requirements will be watered down. And even proponents of the conversion model argue that giving tax breaks to wealthy developers is not the best tool to achieve the goal.
“Developers who think this will benefit their bottom line will do so without incentive,” said Erica Williams, director of the DC Fiscal Policy Institute. “This is a very expensive proposition for an unproven program.”
And, as more employers shift to hybrid work models, the question arises whether people will want to move to city centers if they don’t have to be there every day. .
“You need to make downtown a neighborhood – a place that’s alive, fun, and active,” Pittsburgh Mayor Ed Gainey said during a panel at the United States Conference of Mayors meetings in Washington in Washington. last January. “How do you make it a neighborhood that has a vibe where young people want to be?”
Jordan Woods, a 33-year-old federal government contractor, moved to an apartment in downtown Washington in 2019, drawn in part by the lure of being able to walk to work. He said he was able to find reliable stores and restaurants that stayed open at night, but then the pandemic hit and the city center became “like a moonscape” for more than a year.
“And even before the pandemic, there were still missing basics like playgrounds and dog parks and a normal non-Whole Foods grocery store that I could walk to,” Woods said. “I wouldn’t say I regret it, but if I was considering the same thing right now, I’m not sure I would.”
Chuck D’Aprix, director of Downtown Economics, a development consultancy, said attracting new residents to a former downtown business district poses specific chicken-and-egg problems. The businesses residents need are different from day office workers.
They include mid-size affordable grocery and daycare stores, pet stores, hardware stores, and auto repair garages. And these places must remain open after office hours.
“A lot of these services just aren’t available right now in small-town downtowns or mid-sized downtowns, you know, they close at night,” D’Aprix said.
But with vacancy rates in downtown office buildings continuing to rise, from 12.2% in the fourth quarter of 2019 to 17.8% in the first quarter of 2023, according to real estate firm CBRE, there is urgency to do something. Some of the hardest hit locations include San Francisco with a preliminary vacancy rate of 29.4%, Houston at 23.6%, Philadelphia at 21.7% and Washington at 20.3%.
In New York, where the vacancy rate is 15.5%, Mayor Eric Adams announced a plan in January to bring 500,000 new homes to the city, including what he calls rent-restricted housing.
A key part of this plan is to rezone parts of Midtown Manhattan that currently only allow office and manufacturing space. Along with rezoning, the mayor’s office is pushing bills through the legislature to approve tax breaks that would encourage developers to invest in conversions that include affordable units as well as changes to the city’s multi-unit housing law. State that would allow buildings built up to 1990 to access more flexible regulations that make conversions easier.
“The ability to really take our outdated office stock into the city is a real win-win because not only are we supporting the office market, given the vacancy rates we’re seeing, but we’re also helping to reactivate our neighborhoods of business, which has suffered greatly during the pandemic,” said Deputy Mayor Maria Torres-Springer.
“We can also make a dent in this severe housing crisis that we’ve been in,” she said, noting that more than 70,000 New Yorkers sleep in shelters every night and there is “essentially a functional zero vacancy rate for the most affordable apartments in our city.”
Over the past two decades, nearly 80 office buildings in New York City have been converted into residences — the most in the country according to CBRE. Around 200 more could be at stake over the next decade, according to John Sanchez, executive director of the 5 Borough Housing Movement, which supports the conversion. This would produce approximately 20,000 housing units.
The conversions are credited with transforming lower Manhattan from a neighborhood that shut down at dusk into a sought-after destination for families and foodies.
“What you saw was the fastest growing residential neighborhood in the city,” said Ross Moskowitz, a partner at the law firm Stroock & Stroock & Lavan, which specializes in real estate, land use and public-private partnerships. “All of a sudden you just saw strollers and dogs, so obviously that means people aren’t just coming to work. They’re actually coming to stay.
But conversions alone in New York and elsewhere are unlikely to bring entire neighborhoods back to downtown, nor will they automatically reduce the affordable housing crisis. In a March report, CBRE found that office-to-home conversions accounted for only about 1% of new multi-family projects and that, despite the hype, “there is no evidence” that they have increased significantly .
“Converting buildings isn’t easy,” said Luke Bronin, Mayor of Hartford, Connecticut. “There are a lot of buildings that just aren’t conducive.”
Problems include access to natural light and air, the lack of balconies in most office buildings, and the need to install hundreds of bathrooms and kitchens, as well as the plumbing that supports them. accompanies, in buildings often constructed with only two large bathrooms per floor.
There may also be environmental issues, said Anoop Davé, CEO of Victrix, a property investment management development firm specializing in converting mostly vacant office buildings into residential properties and hotels. “A lot of these buildings could have asbestos or something like that. It’s not necessarily a deal killer, but sometimes the cost or the fix is so great that even if you’re given it for zero, it doesn’t work. not.
Funding, current tenants and zoning issues can also present challenges. Washington, for example, has an overabundance of federal buildings that are untouchable.
Christopher Nicholson, 38, a technical operations analyst, knows firsthand the pros and cons of living in a converted downtown office building — he’s lived in two in downtown Denver. In 2018, it moved into a 31-story former office building built in 1967 which was converted into apartments in 2006.
“It was in the downtown business district, so everything else next to it was office buildings, and there was a large parking lot right next to it,” he said. “There was definitely a lack of green space, the closest park is over half a mile away. The grocery store was about a mile and over.
It moved to its current building in 2020, a 130-year-old nine-story former office building converted in 2000. Its new building is right next to tram and bus stops and close to hotels that have good restaurants and cocktail bars. It makes it easier to meet friends and business colleagues close to home, he said.
“I can’t imagine living anywhere else,” Nicholson said. “I think for what I’m getting, I’m more than happy with the compromises I’ve made.”
Khalil reported from Washington and Casey from Boston. Associated Press writer Manuel Valdes in Seattle contributed to this report.