As more and more people choose to live, work and play in the same place, experts say re-thinking office space may be the next big challenge.
"Things will never be the same," said Gensler principal architect Dean Strombom, who is helping to transform the Niels Esperson building, one of two notable office-to-residential conversions in Houston, Texas. "And there’s a lot of conversation about what the future might be like. Truly, nobody knows.”
The Real Deal website published an article by Erick Pirayesh on January 25, featuring Ike Bams and John Williams, who run Bluelofts in Dallas. This duo are investing heavily in office-to-residential with nearly 3,000 units in the pipeline
Office-to-residential conversions aren’t new, but the trend has taken off since remote work became more the norm, pushing many companies out of their old spaces. Over 16 percent of Texans work remotely now, a figure that has tripled since before the pandemic, according to U.S. Census Bureau data.
Bams and Williams began identifying office-to-residential conversion projects four years ago—“with little success or support,” they admitted. Things have changed, now:
“Building owners who didn’t want to deal with us before or take our offers, started reaching out. We knew that if office was struggling before COVID, now is the time to double down and get after it. In Dallas, they overbuilt during the ’80’s and now there is no way to attract enough tenants to occupy these spaces. And on the flip side, there is a shortage of housing; it’s a natural transition,” Bams said.
Closer to home, KHOU.com posted an article by Jason Miles back in December, detailing two local projects: the above-mentioned 1927 Niels Esperson building and 1801 Smith, also known as 600 Jefferson.
"It’s important for a building like this, that is so wonderful to begin with, to have another life in a new form,” Strombom said. Recently revealed plans will see the historic Esperson building become an amenity-filled combination of new apartments and workspace.
A similar conversion has also begun in 1801 Smith, a building nearly 50 years newer across downtown.
"It’s a transformation from a 1960s office building to 372 housing units,” said ARC3 architect Eddie Mastalerz. He shared renderings of what will look like once work by a Florida-based developer is done.
While these Texas projects are intriguing, the increase in office-to-residentail conversions has not yet hit critical mass. Governing.com published an article by Alan Ehrenhalt in August of 2022 presenting a much more measured analysis.
Mr. Ehrenhalt notes that while lots of people moved out of big-city downtowns at the height of the pandemic, there were “plenty of others eager to come in behind them.” He cautions that conversions are hard to find beyond a few cities. He notes that there are “ scarcely any in Houston, even though it had an office vacancy rate of 22.9 percent as of mid-2021.”
This discrepancy is blamed on developers, who “aren’t convinced that office conversions will bring them big profits”
The most important factor, not just in Buffalo or Dallas but in the nation’s largest cities, is commercial rent. In most of them, despite the vacancy rates, rents have not yet fallen enough to convince landlords and developers to do something drastic. They probably will. Gallup projects that 37 percent of currently used office space will be abandoned in the next few years due to employees working at home.