Will your next home be a former office?

When Erin Sykes set foot in the condominium tower at 15 Broad Street in Manhattan’s Financial District, she was captivated by its elegant lobby chandelier and lofty ceilings. Sykes made the decision to invest in a unit within this former office building, which seamlessly transitioned from commercial to residential use.

The Rise of Office-to-Condo Conversions

In recent years, developers have been repurposing aging office buildings into residential spaces, a trend that gained momentum during the pandemic-induced real estate market upheaval. The housing shortage has become increasingly acute, while remote work trends have led to a surge in office vacancies, leaving numerous commercial buildings deserted.

Addressing Dual Challenges

Erin Sykes, the Chief Economist at Nest Seekers International, recognizes the potential of office-to-condo conversions in tackling two critical issues facing the real estate market: a shortage of housing and an excess of unused office space.

Successful Conversions: A Growing Trend

According to a study by University of North Carolina professor Emil Malizia, from 2010 to 2021, 222 office buildings nationwide were transformed into residential spaces, surpassing the 121 conversions that occurred in the previous six decades. This trend has taken hold in cities like Philadelphia, Cleveland, Los Angeles, and Washington, D.C. While most converted buildings offer rental apartments, some feature for-sale condominiums, such as the iconic Tribune Tower in Chicago and properties in Silver Spring, Maryland.

Advantages of Office Conversions

One significant advantage of office conversions is the reduced noise levels, as these buildings typically feature concrete floors. Residents in these spaces experience less disturbance from neighbors compared to conventional apartments. For example, Sykes describes her building as “a fortress,” emphasizing its tranquility.

Challenges and Considerations

Despite the apparent benefits, developers face several challenges when converting commercial spaces to meet residential code. One major hurdle is the cost, as developers must add extensive plumbing to accommodate individual bathrooms and kitchens for each unit. Additionally, city codes often require windows that can be opened in case of a fire, which may necessitate alterations.

Older office buildings tend to present fewer construction challenges, often featuring windows that open and smaller floorplates, minimizing the distance for essential utilities. For instance, the condo at 15 Broad Street, originally constructed as office space in the early 1900s, exemplifies this advantage.

Conclusion: A Partial Solution

While the conversion of office spaces into residential units offers a promising solution to the housing shortage, it is not without its challenges. The costs associated with these transformations and the intricacies involved mean that office conversions may only provide a partial solution to the nation’s housing shortage, according to real estate experts. As Jamison Manwaring, CEO of Neighborhood Ventures, notes, “We have to be realistic—this is not going to be a quick turn.”