Plumbing

Cities look to revive downtowns by changing workplaces to housing

NEW YORK (AP) — On the 31st floor of a once-towering office building in downtown Manhattan, construction workers are laying down steel bracing for what will soon anchor a variety of residential amenities: a catering station, lounge, fire pit and gas grills.

The building, which has been vacant since 2021, will be converted into 588 standard rental apartments for around 1,000 people. “We’re taking a vacant building and we’re bringing life not just to that building, but to this entire neighborhood,” said Joey Chilelli, managing director of real estate firm Vanbarton Group, which is doing the remodeling.

Across the country, office-to-apartment conversions are being followed as a potential lifeline for struggling downtown business districts that have been emptied during the coronavirus pandemic and may never fully recover. The conversion push is characterized by an emphasis on affordability. Several cities are offering developers serious tax breaks to incentivize office-to-apartment conversions — provided a certain percentage of the apartments are offered at affordable below-market prices.

In January, Pittsburgh announced it would accept proposals to create more affordable housing by “transforming vacant and underutilized office space.” Boston released a downtown revitalization plan in October that included a push for more housing, some of which would come from office conversions. And Seattle in April launched a competition for downtown building owners and design firms to come up with remodeling ideas.

In the nation’s capital, Mayor Muriel Bowser has made office-to-apartment conversions a cornerstone of her plan to repopulate and revitalize the borough’s downtown area. Her “comeback plan” for the capital, announced earlier this year, envisages bringing 15,000 new residents to the city center in addition to the approximately 25,000 already living here.

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Bowser management says about 1 million square feet of downtown real estate is already being converted from commercial to residential. But the city needs to remodel an additional 6 million square feet to meet its goal of 15,000 new downtown residents.

“We’re not going to have as many workers downtown as we did before the pandemic,” Bowser said earlier this year. “Our job is to make sure we get more people downtown.”

But the conversion push has some skeptics. Housing advocates worry that affordable housing requirements could be watered down. And even proponents of the conversion model say tax breaks for wealthy developers aren’t the best way to achieve the goal.

“Developers who believe it will benefit their bottom line will do so with no incentive,” said Erica Williams, director of the DC Fiscal Policy Institute. “This is a very expensive proposition for an unproven program.”

And with more and more employers embracing hybrid working models, the question arises as to whether people want to move downtown if they don’t have to be there every day.

“You have to make downtown a neighborhood — a place that’s vibrant, playful, and active,” Pittsburgh Mayor Ed Gainey said before a panel discussion at the United States Conference of Mayors in Washington last January. “How do you make it a neighborhood that has an atmosphere that young people want to be in?”

Jordan Woods, a 33-year-old federal contractor, moved into an apartment in downtown Washington in 2019, drawn in part by the appeal of being able to walk to work. He said he could find reliable shops and restaurants that stayed open at night, but then the pandemic hit and downtown became “like a lunar landscape” for more than a year.

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“And even before the pandemic, basic things like playgrounds and dog parks and a regular non-whole food grocery store that I could walk to were missing,” Woods said. “I wouldn’t say I regret it, but thinking about the same move now, I’m not sure I would.”

Chuck D’Aprix, director at Downtown Economics, a development consulting firm, said attracting new residents to a former downtown business district comes with specific chicken and egg problems. The businesses that residents need are different from those of day clerks.

These include medium-sized affordable grocery and daycare stores, pet supply stores, hardware stores, and auto repair shops. And these places must remain open beyond office hours.

“A lot of these services just aren’t available in downtown small or medium-sized cities right now, you know, they close at night,” D’Aprix said.

But as vacancies in downtown office buildings continue to rise, from 12.2 percent in the fourth quarter of 2019 to 17.8 percent in the first quarter of 2023, real estate firm CBRE says urgent action is needed. The hardest-hit places include San Francisco, which has a preliminary vacancy rate of 29.4 percent, Houston at 23.6 percent, Philadelphia at 21.7 percent, and Washington at 20.3 percent.

In New York City, where the vacancy rate is 15.5 percent, Mayor Eric Adams announced in January a plan to bring 500,000 new apartments to the city, including so-called rent-restricted units.

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A key element of this plan is the repurposing of portions of Midtown Manhattan that currently only allow for office and manufacturing space. Along with the rezoning, the mayor’s office is pushing legislation in the state legislature to authorize tax breaks that would entice developers to invest in remodeling that includes affordable units, as well as changes in the state’s multifamily housing law that give buildings built through 1990 access to more would allow flexible regulations that facilitate conversions.

“Being able to truly take over our aging office stock in the city is a real win-win as we not only prop up the office market given vacancy rates, but also help to reactivate our business districts that have really suffered just during of the pandemic,” said Deputy Mayor Maria Torres-Springer.

“We can also make a dent in this dire housing crisis that we’re in,” she said, noting that more than 70,000 New Yorkers sleep in shelters every night and there is “essentially a functional zero vacancy rate for the cheapest.” There are apartments in our city.”

In the past two decades, nearly 80 New York office buildings have been converted into apartments — the most in the country, according to CBRE. About 200 more could be at play over the next decade, according to John Sanchez, chief executive of the 5 Borough Housing Movement, which is supporting the rebuild. This would create around 20,000 residential units.

The conversions are credited with transforming Lower Manhattan from a neighborhood that closed at dusk into a coveted destination for families and foodies.

“What you saw was the fastest growing residential neighborhood in the city,” said Ross Moskowitz, a partner at law firm Stroock & Stroock & Lavan, which specializes in real estate, land use and public-private partnerships. “All of a sudden, all you could see was prams and dogs, so obviously that means people aren’t just coming to work. They are indeed here to stay.”

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But redevelopments in New York and elsewhere alone are unlikely to bring back entire inner-city neighborhoods, nor will they automatically put a dent in the affordable housing crisis. In a March report, CBRE found that office-to-home conversions accounted for only about 1 percent of new multi-family projects and that, despite hype that “there is no evidence,” they have grown significantly.

“Remodeling isn’t easy,” said Luke Bronin, the mayor of Hartford, Connecticut. “There are many buildings that are just not conducive.”

Problems include access to natural light and air, the lack of balconies in most office buildings, and the need to install hundreds of bathrooms and kitchens along with associated plumbing in buildings that are often built with only two large bathrooms per floor .

There may also be environmental issues, said Anoop Davé, CEO of Victrix, a real estate investment management development company that specializes in converting mostly vacant office buildings into apartments and hotels. “A lot of these buildings could have asbestos or something like that. It’s not necessarily a deal-killer, but sometimes the cost or refurbishment is so high that even if you get it for zero, it doesn’t work.”

Financing, current tenants and development issues can also pose challenges. Washington, for example, has a plethora of federal buildings that are untouchable.

Christopher Nicholson, 38, a technical operations analyst, knows firsthand the ins and outs of living in a converted downtown office building — he’s lived in downtown Denver in two. In 2018, he moved into a 31-story former office tower built in 1967 that was converted into apartments in 2006.

“It was in the downtown business district, so everything else next door was office buildings, and there was a big parking garage right next door,” he said. “Definitely lacking in green space, nearest park is more than half a mile away. The grocery store was about a mile plus.”

In 2020, he moved into his current building, a 130-year-old, nine-story former office building that was remodeled in 2000. Its new building is right next to the tram and bus station and close to hotels with nice restaurants and cocktail bars. That makes it easy to get friends and business colleagues to meet up near his home, he said.

“I can’t imagine living anywhere else,” Nicholson said. “I think for what I’m getting I’m more than happy with the compromises I made.”

Khalil reported from Washington and Casey from Boston. Associated Press writer Manuel Valdes in Seattle contributed to this report.

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