Converting Offices to Apartments

Construction workers are currently installing steel bracing on the 31st floor of a once towering office building located in downtown Manhattan. The bracing will serve as the foundation for a variety of residential amenities, such as a catering station, lounge, fire pit, and gas grills. This particular building, which has been vacant since 2021, is being transformed into 588 market-rate rental apartments that will house approximately 1,000 people. According to Joey Chilelli, the managing director of Vanbarton Group, the real estate firm behind the conversion, this endeavor will not only revitalize the building but also the surrounding neighborhood.

Throughout the United States, office-to-housing conversions are gaining traction as a potential solution for struggling downtown business districts that were emptied out due to the pandemic and may never fully recover. The focus of this conversion movement is on making housing more affordable, with several cities offering substantial tax breaks to developers who promise a certain percentage of affordable, below-market apartments.

For instance, Pittsburgh announced in January that it would welcome proposals for the conversion of underutilized office space to produce more affordable housing. Meanwhile, Boston released a revitalization plan in October aimed at boosting its downtown area, with a particular emphasis on creating more housing via office conversions. Additionally, Seattle has launched a competition that invites downtown building owners and design firms to pitch their conversion ideas. Mayor Muriel Bowser of the nation's capital has made the conversion of office space into residential units a central part of her plan to bring people back to and rejuvenate Washington D.C.'s downtown. This initiative, which was announced earlier this year as part of Bowser's "comeback plan," aims to attract 15,000 new residents to the downtown area. The city is already converting around one million square feet of downtown commercial space into residential units, but an additional 6 million square feet will be needed to meet Bowser's target.

However, some housing advocates are skeptical that the affordable housing requirements will be weakened, while other advocates believe that tax breaks for wealthy developers are not the most effective tool for achieving this goal. The increasing popularity of hybrid work models also raises questions about whether people will still be willing to live in downtown areas if they do not have to be there every day. Chuck D'Aprix, a development consulting firm principal, stated that attracting new residents to former downtown business districts is difficult as these residents will need different businesses and services than daytime office workers, such as grocery stores, day-care centers, pet supply shops, hardware stores, and auto repair garages that are open outside of business hours.

The increasing vacancy rates of downtown office buildings, especially in San Francisco, Houston, Philadelphia, and Washington D.C., makes the need for change urgent. To address the issue, Mayor Eric Adams of New York City plans to add 500,000 new homes to the city, including rent-restricted units. He aims to do this by rezoning parts of midtown Manhattan that currently only permit office and manufacturing spaces and providing tax breaks to entice developers to invest in conversions that include affordable units. Despite the success of office-to-residential conversion in lower Manhattan, such projects alone cannot fully revive entire downtown neighborhoods or automatically solve the affordable housing crisis.