Ask the Expert: Navigating Office-to-Residential Conversions with Brooks McDaniel
In the latest episode of the Ask the Expert series, STOBG Senior Vice President of Building Repositioning, Brooks McDaniel, explores the complexities of office-to-residential conversions. Join Brooks as he debunks common myths, breaks down cost comparisons, and discusses design challenges, zoning impacts, and government incentives shaping these transformative projects.
HOST
Brooks McDaniel
Senior Vice President of Building Repositioning, STO Building Group (STOBG)View Bio
Ask The Expert:
Navigating Office-to-Residential Conversions with Brooks McDaniel
Hello and welcome to Ask the Expert, a series on the Building Conversations podcast, where STO Building Group (STOBG) experts answer questions from our listeners. I’m your host, Brooks McDaniel, Senior Vice President of building repositioning at STO Building Group (STOBG), and today we’re going to be talking about the ins and outs of office to residential conversions. Let’s get started.
Question one. What are the common myths surrounding office to residential conversions, and how do the realities differ? This is a great question: it’s the one that I’m asked most frequently, the primary myth is that they don’t work for a variety of reasons, such as deep floor plates, plumbing locations are just generally being too challenging. The reality is that most office buildings in big cities like New York can be converted both large and small. The solution to a deep floor plate is to have deeper units, typically 40 to 50 feet deep that make use of interior home offices or interior bedrooms with borrowed light, which is allowed in many cities. The plumbing location is another easy solution, just core drill, the slab where you want the pipes. You don’t need to bring everything back to the core. The reality is that these projects are no more challenging than any other construction project that we work on.
Question two. How do costs compare between constructing new residential buildings and converting existing office spaces? New construction will always be more expensive than a conversion project. Building a rental apartment, high rise building in a city like New York will cost between 450 to $500 per square foot or more, not including the cost to demolish the existing building, which will cost seventy-five to a hundred dollars per square foot. The cost to convert an existing building is in the range of three hundred to $375 per square foot. That’s a fully loaded hard cost construction number. The construction schedule is substantially different as well. Typically, 24 months is all it takes to convert a building to residential, whereas 36 months or more will be needed to build a new residential apartment building.
Question three. What are some common design challenges that office to residential conversions face? Are there solutions from a design perspective? The first thing I look at are the windows. The back of the building needs legal, light and air in New York, which requires a certain amount of depth between the window and the rear lot line. If this isn’t sufficient, then we consider modifying the affected floor plates to create the space we need. The other aspect to consider is operability. Windows need to open in residential buildings. An office building with a fixed curtain wall facade typically doesn’t open, so we work with our design partners to modify the facade to be both operable and energy code compliant. Those are some of the primary challenges in a conversion project. Luckily, we have solutions to these issues.
Question four. How are zoning laws in major cities like New York and Los Angeles impacting building, repositioning projects? New York City recently revised the zoning text to allow as of right conversions of pre 1991 office buildings with several benefits like reduction of rear yard depth elimination of the FAR cap and so on. Similarly, Los Angeles has revised their adaptive reuse ordinance to include buildings constructed as recent as 15 years ago. In other cities across the country and in Canada, there are similar zoning rules in the works to make it easier to convert office buildings.
Question five. What role do government incentives such as tax abatements and streamlined approval processes play in encouraging office to residential conversions? They are a very important piece of the puzzle. New York City is the most generous with a relatively speedy as a right entitlement process of about six months, and a fairly generous tax abatement plan that supports the proforma.
In some cities like Los Angeles and San Francisco, they have passed rules that will speed up their entitlement process as well to about six months from one to two years historically, which translates to saving money on carrying costs. They also have a proposed tax abatement plan at the state level. In California, the regulatory and tax environment for conversions can make or break a project, so it’s encouraging to see these changes in the works in many cities.
Question six. How do urban housing shortages and high office vacancy rates intersect? Is repositioning existing buildings a solution to both? Many cities have housing shortages and high office vacancies. While this is a challenge for cities and building owners alike, it supports residential conversion projects. Office buildings can be acquired at a discount while residential rents remain relatively high. By creating housing out of an office building, you are reducing the oversupply of office and creating much needed housing.
That’s all for today. Thank you for the great questions and keep them coming. Thanks for listening.