The short answer seems to be yes – but without clear expectations for the commercial industry’s post-pandemic rebound, few investors are willing to commit yet.
NEW YORK – Commercial buildings left empty from the COVID-19 pandemic may find a new purpose as affordable housing. Empty hotels from a yearlong lack of travel and tourism as well as empty office buildings due to remote work could drive the trend of repurposing vacant commercial spaces.
“The demand for office space is continuing to change,” Andrew Trueblood, the D.C. Office of Planning director, told FOX Business. “I would say it has accelerated what we’re already beginning to see in terms of you don’t need … as much space per person, and especially as there is more opportunity to telework.”
These empty commercial spaces can be converted into affordable apartment buildings at a time when calls within the housing industry are growing louder for more inventory to meet demand.
However, the process could prove expensive to convert empty buildings, and there are zoning challenges to address, too.
That said, the conversion of a Coast Guard warehouse “wasn’t particularly difficult, it was just expensive … one of the most expensive things we did is we cut 25% of the floor space out of this building to create these courtyards that opened up the interior of the building for light,” explained John E. Akridge, a real estate developer in Washington, D.C.
Last summer, former U.S. Housing and Urban Development Ben Carson said that the growth of remote work could “free up a lot of commercial space, which can be converted to affordable housing.” George Ratiu, realtor.com’s senior economist, had called the office-to-residential conversion a potential “win-win solution in some cities where you’re seeing declining lease renewals and a massive shortage of housing.”
But while some buildings may stand empty for now, the urban office sector is largely expected to rebound. A big question today is by how much?
Trueblood expects “a presence and … need for office space” in the future. However, more firms may lessen their office footprint to accommodate hybrid work schedules. And urban planners say that repurposing any empty space could potentially help meet the demand for greater affordable housing.
Even prior to COVID, some transformations were already taking place. Aging factories, office buildings and department stores in Cleveland, for example, had been repurposed to higher-end apartments – even some offering waterfront views. About 60 buildings in the city have been converted using state and federal tax credits. What’s more, about 2.5 million of Cleveland’s 4.5 million square feet of empty commercial space in the mid-2000s have been turned into housing or hotels, according to the Downtown Cleveland Alliance.
This March, a New York state lawmaker introduced legislation to allow the state to buy financially distressed commercial buildings and convert them into housing for low-income and homeless individuals. The bill, if approved, would allow the state government to purchase and convert office buildings and hotels that are up for sale.
Source: “New Commercial Real Estate Trend Accelerated by COVID,” FOX Business (April 14, 2021) and “No Vacancy? Here’s One Fix for the Affordable-Housing Shortage,” MarketWatch (April 12, 2021)
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