Hard to fill office space in the 100 plus year-old building consisting of smaller, irregularly shaped floor plates proves ideal for apartment conversions. With multifamily housing in demand, a growing number of office property owners are revamping old office buildings into residences with the appeal of city life. It's happening around the U.S. even as signs point to an office market recovery in many metro areas. In contrast, due to vacancy in the older 40- to 50-year-old vintage buildings, investors are often converting these to residential uses. Many owners are tired of sitting on a 50-60%-leased office building. It makes for a compelling decision to convert especially since financing is readily available. Downtown Manhattan and Los Angeles have been at the forefront of the trend but conversions have been happening more aggressively the past two years in several cities, including Philadelphia and Baltimore.
Take for example, 10 Light Street, Baltimore’s iconic office tower conversion into apartments. The 520,000 square foot, 34 story structure will be converted to 445 for-lease residences. The Art Deco building is fashioned from Indiana limestone and local brick over a steel frame. The building’s exterior is decorated with carved, Mayan Revival-style images and is capped with a copper and gold mansard roof. The ornate, four-story main colonnaded lobby is decorated with mosaic floors and historic murals depicting Baltimore’s history.
Some key factors driving the conversion trend:
Over the past five years there's been a flight on the part of the millennials to urbanized environments.
There's a trend toward unrelated people living together in the wake of the housing downturn and high unemployment.
Many cities in the Northeast and Midwest have prewar office buildings that have become functionally obsolete that "don't align" with today's office tenants.
Competitive newer office space availability buildings constructed since 2008.
Many expect the office-to-multifamily conversion trend to continue!
Source: Tony Casalena, CCIM