The shift to remote or hybrid work has created empty office buildings across the U.S. And, instead of tearing them down, some owners and investors are giving them new use.
Commercial building owners across the country are gutting out vacant floors of office buildings and converting them into residential units.
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After seeing a rise in office vacancy, Dougal Cameron owns commercial properties and designed a plan where people can work, live, and host events all inside of Houston’s Historic Esperson building.
“In the office building sector, usually supply always keeps going up. You keep building new office buildings and new office buildings. Well, that’s stopped right now” Cameron said.
He says residential units caught his eye because he knows people will always need a place to live.
“If your office building is vacant, it’s unfortunately a tough time in the marketplace. But a good thing about residential is, residential will fill up” Cameron said.
Across the country, “office-to-housing” conversions are serving as a “lifeline” for struggling building owners, who lost upwards of 20% of their commercial renters during the pandemic.
Dr. Harold Hunt, Ph.D. studies real estate trends at Texas A&M’s Real Estate Research Center. He says office buildings may never decrease in vacancies.
“You’ve got people that have gotten used to hybrid work or remote work and so the office demand is down, but yet we’ve still got really strong demand for residential housing” Dr. Hunt said.
Cities like Boston and Seattle are welcoming the conversions, offering contests for the best designs. And, cities like New York and Pittsburgh are offering major tax breaks and re-zoning areas that have only allowed offices to now include housing.
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“It makes them more dynamic cities. You can have mixed use, more residential people downtown. I think every city would like to see that. Even smaller cities” Dr. Hunt said.
While the conversions are reviving downtown areas, helping building owners, and providing more residences, Cameron says they’re profiting less than desired, because renovations can be expensive. And, many cities are pushing for affordable units that will help attract people to downtown living.
“It is not as lucrative for an office building to be residential. You don’t make as much money doing that. But, if your office building is worth nothing, then it’s a good alternative” Cameron said.
Cameron’s plans also include a Vertical Entrepreneurial Village, that welcomes start-ups and allows them to secure investment capital while being given affordable housing and office space. The hope is that these startups become major corporations and keep their headquarters in his building.