Benefits of Converting Office Space

𝗪𝗵𝗮𝘁 𝗱𝗼 𝘆𝗼𝘂 𝗱𝗼 𝘄𝗵𝗲𝗻 𝘁𝗵𝗲 𝘄𝗼𝗿𝗹𝗱 𝗰𝗵𝗮𝗻𝗴𝗲𝘀 𝗼𝘃𝗲𝗿𝗻𝗶𝗴𝗵𝘁? You innovate. When the pandemic emptied office buildings around the globe, most saw a crisis. Gensler saw an opportunity. Architect Steven Paynter and his team realized that many of these vacant office spaces could find a second life as residential buildings. However, evaluating the conversion potential of each property was a slow, costly process. Instead of throwing his hands up in defeat, his team got to work on developing an algorithm that could determine conversion feasibility in hours instead of weeks. By analyzing 150 key factors—like window depth, elevator count, and parking space availability—Gensler created a tool that turned complexity into simplicity. 𝗧𝗵𝗮𝗻𝗸𝘀 𝘁𝗼 𝘁𝗵𝗲𝗶𝗿 𝗶𝗻𝗻𝗼𝘃𝗮𝘁𝗶𝘃𝗲 𝘁𝗲𝗰𝗵, 𝘀𝗼 𝗳𝗮𝗿, 𝗚𝗲𝗻𝘀𝗹𝗲𝗿 𝗵𝗮𝘀: • 𝗘𝘃𝗮𝗹𝘂𝗮𝘁𝗲𝗱 𝟭,𝟮𝟬𝟬+ 𝗯𝘂𝗶𝗹𝗱𝗶𝗻𝗴𝘀 𝗴𝗹𝗼𝗯𝗮𝗹𝗹𝘆 • 𝗟𝗲𝗱 𝘁𝗼 𝘁𝗵𝗲 𝗰𝗼𝗻𝘃𝗲𝗿𝘀𝗶𝗼𝗻 𝗼𝗳 𝟭𝟱𝟬 𝗯𝘂𝗶𝗹𝗱𝗶𝗻𝗴𝘀 • 𝗥𝗲𝘃𝗶𝘁𝗮𝗹𝗶𝘇𝗲𝗱 𝘂𝗿𝗯𝗮𝗻 𝗮𝗿𝗲𝗮𝘀 𝗶𝗻 𝟭𝟮𝟵 𝗰𝗶𝘁𝗶𝗲𝘀 As you can imagine, adaptive reuse of buildings minimizes demolition debris, which constitutes approximately 90% of the half a billion tons of construction waste generated annually in the U.S. Building conversions also lead to construction cost reductions of 25% to 35% compared to new builds, making them a financially viable option for developers. Not to mention, transforming underutilized office spaces into residential units enhances property values and attracts investment, contributing to economic growth in urban centers. Take Baton Rouge, where a Brutalist office building from the 1960s became 144 modern residential units. Or the Pearl House in New York, now the city’s largest office-to-residential conversion project. But this isn’t just about real estate—it’s about solving difficult problems with an upgraded mindset. Paynter’s team didn’t just adapt; they innovated. They turned a challenge into a scalable solution that’s reshaping how cities work and live. How can you apply this thinking to your own organization? • 𝗜𝗱𝗲𝗻𝘁𝗶𝗳𝘆 𝗛𝗶𝗱𝗱𝗲𝗻 𝗢𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝗶𝗲𝘀: What problems could you solve by looking at them from a new angle? • 𝗦𝗶𝗺𝗽𝗹𝗶𝗳𝘆 𝗳𝗼𝗿 𝗜𝗺𝗽𝗮𝗰𝘁: Gensler’s algorithm worked because it was fast, simple, and actionable. Can you streamline a process to unlock potential? • 𝗧𝗵𝗶𝗻𝗸 𝗕𝗲𝘆𝗼𝗻𝗱 𝘁𝗵𝗲 𝗢𝗯𝘃𝗶𝗼𝘂𝘀: It wasn’t just about offices—it was about revitalizing communities. What larger purpose can your innovation serve? Gensler’s story reminds us that innovation isn’t reserved for the tech giants—it’s for anyone willing to rethink the status quo and turn challenges into catalysts. What challenges could you reimagine in your organization today? Share your thoughts below, and let’s inspire some bold ideas together.

🏢➡️🏠 Adaptive reuse isn’t just a trend — it’s the future of commercial real estate. The pandemic didn’t just accelerate remote work, it threw a spotlight on the massive vacancy crisis in office spaces nationwide. But here’s the thing: where others see empty buildings, smart investors see opportunity—and adaptive reuse is the key. 🤔 Why now? Office vacancy rates in many major metros are hovering around 20% or higher. Landlords can’t just sit on these assets. Repurposing them into multifamily housing, mixed-use developments, or even industrial uses like last-mile storage isn’t just creative—it’s becoming necessary to preserve and grow value. 📊 Unique insights you won’t find in your average market report: 🔹 Zoning flexibility is increasing. Cities battling commercial vacancies are relaxing zoning laws to encourage conversions—sometimes waiving parking minimums or offering tax incentives. Some municipalities, like Austin and Seattle, now fast-track adaptive reuse permits to spur redevelopment. 🔹 Structural realities favor conversions in certain building types. For example, buildings with large floor plates and good ceiling heights are ideal candidates for data centers or logistics hubs, while older office buildings with smaller footprints and lots of windows are perfect for multifamily or co-living spaces. 🔹 Tenant demand is shifting fast. Post-pandemic renters are prioritizing walkability, mixed-use neighborhoods, and amenities over traditional office proximity. Converted office-to-residential projects in walkable downtown areas are seeing 20-30% higher lease absorption rates than greenfield developments on the outskirts. 🔹 Capital stack innovation is accelerating. Investors are blending historic tax credits, Opportunity Zone funds, and green building grants to finance conversions that might otherwise be too costly. This layering of incentives makes complex adaptive reuse projects financially feasible—and even lucrative. 💭 A deeper look: The rise of last-mile logistics in converted office and retail spaces E-commerce growth exploded during the pandemic, and so did demand for last-mile fulfillment centers. Some investors are repurposing underperforming office and retail buildings into urban logistics hubs—offering a higher return profile than traditional leasing. This shift is creating a new class of “urban industrial” real estate that’s often overlooked in traditional commercial portfolios. 📈 What does this mean for investors? Adaptive reuse isn’t just an exit strategy for struggling office assets—it’s a frontier of alpha generation. But success depends on digging into hyper-local zoning, tenant demographics, infrastructure capacity, and financing tools. The winners in this space are those who combine deep market knowledge with creative capital structuring and operational agility. The commercial vacancy crisis is forcing us to rethink what real estate can be—and adaptive reuse is leading the way.

Everyone says office conversions don't work. This developer just doubled this building's value. Here's what nobody tells you: A record 71,000 office-to-apartment conversions are in the pipeline. Most will fail. Some will soar. Here's how Connecticut-based developer Juan Salas-Romer turned one into gold: The scene: An 1855 building in New Haven. 13,900 square feet of history. And one massive opportunity hiding in plain sight. When their largest tenant left, most would enter crisis mode. But Juan saw conversion. The math is simple: Office space brought in $18 per square foot. Apartments? $43.20. A simple 2.4x revenue play. But the execution is never simple. Nobody tells you about: • The sprinkler system that ate their budget • The plumbing that killed their layout • The HVAC that changed everything • The fire codes that rewrote their plans The result? • 34% over budget • 5 months behind schedule • Countless "surprises” But watch what happened next: Before conversion: NOI sat at $154,380. Building valued at $2.2M. After their magic: • NOI jumped to $267,000 • Value hit $4.45M • $1.075M in equity Here's what Juan and his team learned the hard way: • Window placement (it limits everything) • Plumbing costs (they explode) • HVAC flexibility (it disappears) • Fire code impact (it changes everything) Most conversions fail because nobody checks these basic things. But when it works? • Revenue jumps 44% • NOI soars 73% • Value doubles Before you touch an office building, check: • Natural light feasibility • Plumbing capacity • HVAC flexibility • Structural integrity • Budget contingency (we learned 30%+ is smart) Here's the reality: we're watching office buildings die while housing demand hits record highs. The opportunity is obvious, but the execution? That's where most people fail. The full story is linked in the comments.

Is #Seattle's office conversion plan economic genius or folly? At first glance, spending $3.66 billion to create $1.22 billion in #housing value seems absurd. That's a $2.44 billion loss. But consider the alternative: $11.76 billion in lost #office rent over 7 years. Suddenly, that $2.44 billion "loss" looks like a $9.32 billion #win. Here's the real kicker: This isn't just about #money. It's about transforming dead urban space into #living, breathing neighborhoods. Each #converted office could mean fewer car trips, more local businesses, and a revitalized downtown core. The takeaway? Sometimes, the best urban planning looks like bad math on paper. Seattle's not just filling buildings; they're buying a new urban #future at a 79% discount. . https://lnkd.in/gxuZmQ-r

Are office-to-residential conversions all they're hyped up to be? The potential benefits are awesome: - Addresses a potential oversupply of office - Addresses housing shortages in desirable urban areas - Retrofitting buildings to peak energy efficiency during conversion Americans are spending an all-time-high percentage of their income on rents, and homes are an increasingly expensive purchase for the average American. At the same time, older office space is suffering from a lack of demand as the pandemic accelerated (already existing) remote and hybrid work trends. This older office space is also more likely to be exposed to fines from Local Law 97, which could further lower an older office's value. I think office-to-residential conversions make sense when the floor plans make sense. (Bobby Fijan is a great resource on this topic if you're interested in going deep on it.) And I do think we'll see more policies that encourage conversions of underused office space to housing, because cities need to be vibrant and mixed-use in order to retain and attract residents. "The most sustainable building is the one already built!" Pictured: One Wall Street / Macklowe Properties #officetoresidential #realestate #climate #retrofitting