Sherman Associates’ Post

600,000sf of vacant office space converted to 403 homes for ~1000 people that’ll largely be there 7 days a week. This represents ~1.5% of overall office space in the combined downtowns of Minneapolis & St Paul. The positive outcomes of these types of conversion projects include tax base stabilization(this is big) and growth, sustainability/reuse of material, job generator with 2/3rds of cost going to labor vs opposite on new construction, delivery of natural affordability, catalyst for spurring on adjacent investments and so much more. Living, working, playing and staying continue to become more and more intermingled in our downtowns. This isn’t new(north loop, mill district, lowertown, etc), but can now be accelerated through opportunities like these and private financing aligning optimally with the Federal(let’s maximize how much we bring in to MN), State & Local resources/tools that are Essential to the viability of these projects. Neighborhoods are the present and future of downtowns. Let’s keep accelerating this work forward.

Great article focusing on Chicago’s response to the big post-covid issue facing many cities - huge surplus office space, particularly with older buildings leading to a lack of vibrancy in streets and neighbourhoods. Chicago’s answer - private/public partnerships and subsidies for developers to convert old offices to residential & mixed use to meet demand for city living. The subsidies support increased provision of affordable/lower cost homes as they recognise it is in the city’s interest to create vibrant, safe streets with all the amenties there to support and enhance living in the City. We could learn from this in Belfast as well as Dublin. In addition to looking at the larger new-build BTR resi models in Belfast we should also be looking for opportunities to do similar- let’s call it RTR - ‘Repurpose to Rent’ - to help bring life back to some parts of the city centre by looking at how we can adapt and repurpose what we can into homes.

ℝ𝕖𝕒𝕔𝕙𝕚𝕟𝕘 𝕗𝕠𝕣 𝕥𝕙𝕖 𝕔𝕠𝕟𝕧𝕖𝕣𝕤𝕚𝕠𝕟 ᴀɴ ᴇxᴀᴍᴘʟᴇ ꜰᴏʀ ᴅᴏᴜʙʟɪɴ ᴄɪᴛʏ ʟɪᴠɪɴɢ. Chicago Mayor Johnson is proceeding with a revamp of empty downtown buildings estimated at $1 billion, to counter a commercial real estate crisis. LaSalle Street, once known as the Wall Street of Chicago, has been struggling to fill offices after the pandemic, which has hollowed out parts of downtown. Chicago financially supports projects to transition some office buildings into residential to provide affordable housing. It’s in the city’s interest to have downtown as a vibrant place. The LaSalle Street initiative, offers generous subsidies to developers, to revamp outmoded office properties (#strandedassets) with apartments, where min 30% of units are affordable. Public funding through district tax-increment financing offers supports ranging from a quarter to half the budget. Chicago wants to draw people to its theaters, restaurants and amenities, Eighty-five percent of real estate in the area is dedicated to office space, with 5 million square feet vacant. Companies are uping pressure for workers to return to the office. But the city has recognised a revitalised downtown can’t rely on traditional office space alone. It’s needs residential units in the mix. https://lnkd.in/eCUsguAt

In today's Thesis Driven Ehson Kolb explores when office-to-residential conversions make sense... and when they don't. With office vacancy hitting an all-time high of 19.7% in Q4'23 - and an estimated shortage of between 2 and 6 million housing units - converting offices to housing makes a lot of sense in theory. But in practice, many offices are poorly situated for residential conversions with wide floor plates and insufficient utilities. Here, we walk through three scenarios in which conversions make sense: 🗝 Old Buildings: Prior to WWII, office buildings generally didn't have air conditioning, so thinner floor plates with openable windows allowed the building to stay cool. These thinner floor plates work much better for residential conversions. 💰 High Rents: Prior to the pandemic, the majority of office-to-resi conversions happened in places with very high rents such as Manhattan and San Francisco. In lower Manhattan, Metroloft is converting office buildings to rental apartments by blowing a lightwell in the middle of the tower, which makes sense when rents are north of $4,000 per month. 🗺 Zoning quirks and historic structures: Many buildings can't be torn down due to historic protections or other zoning quirks - for instance, many office buildings in Manhattan are overbuilt versus current zoning. In these cases, a teardown is impossible and conversion is the only option. As always, a link to the full deep dive can be found in the comments!

CIM Group's plan to convert a 107,128 SF office into 91 apartments is a case study in the challenges of office-to-resi plays. The $75M project only pencils out if they can add 20,000 SF. That's an extra 20 units, a 22% boost to NOI. This is a first for Boston's conversion program. If the city green-lights the vertical expansion, it's a game-changer. Developers could add height and density to hit their IRR hurdles. In a market drowning in vacant offices, this could turbocharge conversions. The numbers tell the story. "In order for the contemplated deal to work, CIM Group would need at least an additional ~20K [gross square footage] of massing to be added to the existing structure." That's the key: massing = margin. But it's not just about one project. If Boston opens the door to adding floors, it could unlock a tsunami of conversions. Vacant offices become resi towers. The skyline, transformed. Of course, zoning, costs, and NIMBYs will fight back. But if CIM can prove the model, the floodgates open. Boston's big bet on conversions could pay off, big time. https://lnkd.in/gx7pUXMR

So when can we expect to start seeing obsolete office buildings being transformed into much needed apartments? Don’t hold your breath. A massive wave of conversions isn’t likely in the near-to-medium term, local experts say. “It’s very, very difficult to convert office to residential,” said Jim Pearlstein, president of Pearl Properties, at a June Center City District meeting. “I have a lot of nightmare stories,” said Pearlstein, who has plenty of pre-COVID office-conversion experience. “That’s not taking into consideration construction costs, which are so high right now. … The depth of the market [for residential conversion] isn’t the answer that we all think it can be.” #cre #officebuildings #conversion https://lnkd.in/emArahUk

Re-purposing under used former office blocks in our city centres as housing is to be applauded. Breeding new much needed life back into our urban centres. There are numerous opportunities that will arise in the coming years as hybrid working becomes rooted in society. Reduced working weeks and a more concentrated and efficient management of workers time rotation programming will result in a potential drop of up to a third in office floor space demand in city centres. So some of the older, out-dated and poorly serviced office buildings are likely to be replaced or re-purposed. Prime city centre opportunities in 1970’s buildings will present themselves in the coming years. This is already happening in many cities in U.K. and with local planning legislation not requiring a change of use application for office to residential, the path is well set. The course of reduced office demand looks certain to continue for the coming 10 years before equilibrium in demand is likely to be reached. In addition, the on-coming emergence of autonomous vehicles and car sharing (robocabs & uber type ownership) will mean the demise of the urban multi-storey car park demand and these valuable city centre sites will become available for development. The changing landscape of our cities is emerging and hopefully one that will include more people and families living in cities

Will Boston ever have enough #affordable #housing? Thank you WBZ | CBS Boston for keeping us informed. With Boston in the midst of a housing crisis, could office buildings be the solution? Boston has tens of millions of square footage of office space. But in the new empty desk world of "Let's just Zoom!" some office buildings are partially or completely empty. "Office Space Available to Lease" signs dot the landscape. At Gensler, a global architecture and design firm in Beacon Hill, architects and designers have been consistently talking with landlords and developers about transforming offices into residential buildings. Jared Krieger, an architect at Gensler, thinks turning office space into living space could be one of the tools in fixing Boston's housing crisis. "It's one of the answers. It's supply and demand and if you don't build more, the prices will never come down," he said. Almost 20% of Boston's office space is vacant and top city leaders actually see that as an opportunity. James Arthur Jemison, Boston's chief of planning at Boston Planning & Development Agency is leading the city's new pilot program that offers a massive 75% property tax discount to owners willing to transform their office buildings. That tax break lasts for 29 years. Right now, the program is focused on some of the smaller, older buildings that are really struggling trying to compete with newer offices with tons of amenities. "Those are the buildings we are trying to turn as fast as possible," Jemison said. Right now, four buildings have signed up with hopes of beginning their renovations over the next couple of months. One is an old brownstone on Franklin Street in the Financial District. Another is on Devonshire and Washington in Downtown Crossing. There are two more buildings in the West End by Storrow Drive. Those four spots will be turned into 170 housing units. Twenty percent of the units must be affordable housing. Jemison considers those four buildings a test. #Boston #RealEstate #Affordable #TaxCredits #Construction

"While it may sound relatively easy to convert vacant offices into multifamily buildings, it’s much more difficult in practice. To even consider a conversion, one needs to identify the right property in terms of floor plates, location, age, and, of course, price, et cetera. It’s like a complex Rubik’s Cube to determine if it’s structurally feasible to convert a building, and if the costs and fees make financial sense." --Chris Robbins, GREENROCK™. Recently, I interviewed four experts about the realities--and the promise--of converting office buildings for residential use in urban cores. Urban Land Institute Sibley Fleming Brett Widness Mary Ludgin Chris Robbins Karin Liljegren Geeti Silwal #commercialrealestate #adaptivereuse https://lnkd.in/gpcRmadb

Downtown San Diego's Office Retail Industry: A Daily Recap In today's recap, we delve into the dynamic changes reshaping Downtown San Diego post-COVID. While office spaces grapple with high vacancy rates, the landscape is bustling with activity as retail and residential properties flourish, signaling robust demand. Exciting projects such as the redevelopment of Horton Plaza and the emergence of residential marvels like Revel and The Lindley are leading the charge and setting a precedent. With a focus on middle-income housing and inventive repurposing of office spaces, Downtown SD is charting a promising course for the future. Optimism abounds regarding downtown's revitalization and its potential for exponential growth. But what are your thoughts? As office vacancy rates remain a concern, do you believe it's time for the city to attract new industries downtown? And how might this influence our local economy? Moreover, let's not ignore the pressing challenges of homelessness and safety concerns. How do you envision addressing these issues to foster even greater growth downtown? Join the conversation and share your insights! https://lnkd.in/gczHfq9Q