The idea of remodeling office buildings as apartment buildings is attracting the attention of a wide range of stakeholders. In markets like Dallas, Los Angeles, Washington, DC and New York City, the confluence of high demand for residential and struggling office real estate has led to conversion projects. Old office buildings from the first half of the 20th century and later can offer listed architecture.
But the enthusiasm that emerged late in the pandemic was to be tempered by the complex realities of design, construction and financing.
“Things calmed down a bit when people realized that conversion is very complex and it takes a thorough analysis to really assess whether an office building is convertable,” said Mack Selberg, managing director of the architecture firm Ankrom Moisan. “Conversions really need to be thought of as the opposite of a template – you have to know everything about the building before you can predict how the conversion will go.”
layouts and viability
From a financial perspective, office conversions can be contradictory; Properties to be remodeled typically need to be in locations where rents are high enough to justify the cost of the renovation. This often raises the question of whether state or local governments offer attractive incentives for the implementation of projects.
A differentiator is the conversion to rental versus private ownership. “Many conversions don’t work when the owner intends to sell the units as condos due to lending practices,” noted Paula DeLiso, vice president of business development at MBH Architects. “Office buildings that are repositioned for tenants can be much easier to finance for the building owner.”
Technical issues are often a major reason for hitting the pause button. The conversion of office buildings into residential buildings presents opportunities and infrastructure challenges that come with a higher price. The layout must be suitable for residential use, and the infrastructure of the building may not be suitable. Floor plan overhauls and structural changes will drive up costs, as will remodeling HVAC, plumbing, and electrical systems.
Conversion targets are only as attractive as their layouts, which must be compatible enough to make the structure transformation possible.
“Often times when I look at office buildings, their shape just doesn’t allow for repurposing or adaptive reuse simply because of the way they are designed or built,” said Ryan Kimura, senior vice president of strategic partnerships at a Dallas-based company design services company premierwho found that hotels are often attractive targets for conversions due to their linear design.
In search of the light
When office buildings are reviewed for potential repurposing, a configuration that provides access to light and air is a top priority. “The biggest problem is that the building is too deep to provide enough natural light,” said Tim Haley, technical director and senior associate at Alameda, California MBH Architects. “For an office remodel to work well, you should choose a narrower tower or one with an ‘L’ or ‘O’ shaped baseplate to maximize light for each unit.”
One solution is to add a light well in the middle of the building. But that doesn’t fit in earthquake-prone regions like the San Francisco Bay Area. Installing a light well would eliminate much of the floor space, which acts as a structural membrane to resist earthquake and wind loads, Haley noted. Older Class B and Class C buildings on the Pacific Coast will likely require seismic upgrades as part of the remodeling process, a factor that increases rehabilitation costs.
behind the walls
Costs are driven not only by structural changes, but also by remodeling heating, cooling, ventilation, plumbing, and electrical systems for residential use. What goes on behind the walls and under the floorboards is key to remodeling a property. Age and durability of wiring systems is an important consideration, as are natural gas distribution systems.
What goes on behind the walls and under the floorboards is key to remodeling a property. Age and durability of wiring systems is an important consideration, as are natural gas distribution systems.
“Due to the more stringent requirements, you probably won’t be able to reuse gas systems in buildings,” said Dan Colombini, director of New York City-based engineering firm Goldman Copeland. Residential buildings require large, centralized hot water heating systems, and new residential buildings should incorporate energy-efficient heat pump technology.
In an office building, the sanitary installation is often less distributed than in an apartment building with numerous kitchens and bathrooms. “The lines go through these buildings like raindrops,” Selberg said. Some older plumbing systems are being replaced wholesale. Making a property compliant with residential security regulations is a challenge, as is ensuring universal wireless internet access. “Sometimes older office buildings have a lot of concrete structure,” Kimura said. “And signals don’t necessarily go through concrete very well.”
Art Deco landmark
Two high-profile Manhattan projects, both with Art Deco landmarks, illustrate the possibilities and challenges of remodeling. Macklowe Properties recently unveiled One Wall Street, the 50-story limestone Art Deco tower that stands on Broadway and Wall Street adjacent to the New York Stock Exchange earlier this year. The building was designed by Ralph Walker for the Irving Trust Co. in 1931 and expanded in 1963. With more than 1 million square feet of total floor space, the project is the city’s largest office-to-residential conversion to date.
Resolution Real Estate is in the process of converting a portion of the 650,000-square-foot McGraw Hill Building in Midtown Manhattan from an office to a residential building for property owner Deco Tower Associates. The Art Deco skyscraper at 330 West 42nd Street was built in 1931 for a single tenant, McGraw-Hill Publishing Co. Designed by Raymond Hood and J. André Fouilhoux, it is a New York City Landmark and a National Historic Landmark and is listed on the National Register of Historic Places.
“It has enormous floor slabs and a very high ceiling,” said Gerard Nocera, a managing partner at in New York, who was originally commissioned to refurbish the building as an office property. As COVID hit and the office market changed, “we realized that the top part of the building is perfect to meet today’s high demands for rental housing,” he said.
The building’s central location and thoroughfare, which tends to make it an attractive office property, made it a prime candidate for conversion. “We changed the core of the building, made it tighter,” Nocera said. The company brought in brand new electrics, air conditioning and windows, and destination delivery elevators for a new residential lobby.
Laws governing lobbies are one of many examples of New York regulations affecting residential buildings. Fire protection equipment must be separate in mixed-use buildings, and bedrooms, which must have windows, must not be on a property line.
“We were lucky, we’re an as-of-right project, not technically a conversion, so I don’t need to get[the Department of]Urban Planning approval,” Nocera said. This approval process would take approximately a year, although actions to streamline the process are pending.
The new lobby is a New York City requirement that mandates separate residential entrances and elevators for mixed-use buildings. Construction of the apartments is expected to start in June, rentals will begin in 2024.
Read the May 2023 issue of MHN.
