Conversions for under-utilized commercial properties became commonplace over the past year, with office-to-housing conversions among the most popular. Such conversions simultaneously address two of the biggest challenges facing commercial real estate today: the rising demand for affordable housing and diminishing demand for office space.
But what makes an office property a good candidate for conversion?
Difference in rent
If the rent for office space is a lot more than housing, it’s hard to justify the cost of converting. However, office demand is likely to stay low in many markets, driving rent down and making conversion more attractive in the future.
Old vs. new
Older buildings that haven’t been recently renovated are better choices for conversion. They’re generally less expensive, and they’re likely to need work regardless of how they’re used going forward.
Building shape and natural light
Cube- and wedge-shaped buildings are generally easier to convert into rental units with access to natural light.
For more information about the office-to-housing trend, check out the National Association of Retailers detailed report published in November 2021.