Has the pandemic sped up the change in the amount of office space we need? A recent news story by Fox Business seems to point to the new trend of converting office spaces into housing as here to stay.
According to Fox Business, the trend of taking unused commercial real estate and converting it into housing has been ticking upward, sped up by the pandemic. Because more people are working at home, the belief is permanently, less office space is needed. But re-purposing old commercial real estate for housing is hardly new (you can click to see the blog we already did on this 2 years ago). Loft-style downtown apartments have been trendy since the 1990s. 30 years ago commercial developers started to see the positives of taking unused old warehouses and making them into housing, as younger people started to flock to downtown in cities all over America. These apartments have been typically higher in rent than the average apartment. Can the new trend lead to lower rents and more access to housing for lower-class individuals.
The pandemic has closed offices, and in some cases people working remotely will stay that way, even when we’re back to normal. In Washington D.C., the hope is that some of these newly empty offices can be converted into affordable housing. In the Fox Business story, D.C. Office of Planning director Andrew Trueblood is confident this will spread to other cities in the country.
However, for this trend to take off, costs would likely have to come down. The cost of converting office spaces into apartments is very high, which is why these apartments are usually higher in rent. Even with higher rent, most office spaces rent for much more than apartments. So, for affordable housing to work, developers are going to have to try to lower the conversion costs. An article, also from Washington D.C. from 2017 was recently re-shared as this topic took off at the beginning of the pandemic. That article found it costs nearly $100,000 for every apartment unit created from office space. While the rewards are usually greater, if affordable housing is the goal, the patience to see a return on investment might not be worth it for some investors.
Will some of Jacksonville’s old spaces be used for housing? As more people move to our area, housing has been a hot topic. With so little real estate inventory on the market, unused office spaces could create apartments to house these new residents. However, I wouldn’t expect them to be considered affordable housing.
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