By Jack Rogers

October 02, 2023 at 05:18 AM

City’s “request for info” draws eight buildings, could yield 1,100 units.

Eight office building owners have responded to the city’s “request for information” aiming to identify landlords interested in converting their San Francisco properties to apartments or condos, according to the city’s Office of Economic and Workforce Development.

Five of the buildings are in the greater Mid-Market and Civic Center neighborhoods, two are in the Financial District and one is near Yerba Buena.

All of them are aging: they were built between 1900 and 1967, the San Francisco Chronicle reported. The combined square footage of the eight buildings totals less than 1M SF.

The city estimates that if all eight properties were converted from office to residential, it would create about 1,100 new apartment units, with the largest building yielding 300 units and the smallest about 40.

The city agreed to keep the addresses of the buildings confidential because existing tenants could be impacted. The Office of Economic and Workforce Development is conducting one-on-one interviews with the eight property owners.

Anne Taupier, the city’s economic development director, told the Chronicle the city interprets the response to its request for information as an indication that an increasing number of landlords have concluded that the persistence of remote work has rendered some older office buildings obsolete.

“We were pleased with the responses, it was more than we had expected and there was a good variety of buildings,” Taupier told the newspaper. “We think there is a chance to see some game-changing activation.”

Taupier indicated that the eight respondents own buildings that are vacant, partially vacant or have tenants with expiring leases who may not renew. She described the request for information as a “fact-finding mission” to give the city a better understanding of the financial or bureaucratic obstacles that stand in the way of office conversions.

She said most of the aging properties would be candidates for Mills Act tax credits, which allow cities to reduce taxes for 10 years or more to owners of historic properties.

Specifically, the economic development director said the city wanted to identify “financial shortfalls” hampering conversions and to determine solutions either in the form of new legislation or ballot initiatives.

San Francisco has been easing zoning regulation and lowering fees to try to spur office-to-resi conversions. State Sen. Scott Weiner has announced that he plans to introduce legislation in January creating tax breaks for conversion projects, incentives that will be part of a downtown revitalization bill.

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Conversion from office space to apartments is getting harder. Let’s discuss why, and also what the effort is really all about.

Only 3,575 apartment units were converted from office space last year. The already fraught process now faces even more challenges.

The Wall Street Journal explains why in its report Turning Empty Offices Into Apartments Is Getting Even Harder

Cities hoping to convert emptying office buildings into apartments are running into financing issues, stagnating rental markets and other challenges that are bottling up their efforts.

Developers last year created just 3,575 apartment units in the U.S. through office conversions, according to an analysis by rental listing site RentCafe. That amounts to less than 1% of all apartments built that year through new construction. 

Federal and local governments are also trying to give conversions a boost. The White House said last month that it was updating guidance for existing grants and spending programs to make billions in federal dollars available for these projects. It also said it would seek the conversion of more government-owned properties into housing.

Some cities, such as Washington, D.C., New York and San Francisco, are also taking steps to encourage more conversions. Tax incentives and faster approvals are “rocket fuel” for these projects, said Sheila Botting, a principal at commercial property brokerage Avison Young.

Even so, the process has always been fraught with difficulty and few office buildings are natural candidates. Conversions are easiest in older, lower-quality and mostly empty buildings with small floors. But less than 1% of office space in the biggest U.S. cities ticks those boxes, according to Avison Young.

In significant ways, the conversion process is getting even harder now. Slowing rent growth might make apartment conversions less attractive to investors, if the trend persists into next year. Asking rents for apartments have fallen 1.2% nationally over the past 12 months, according to rentals website Apartment List.

Projects Not Economical

Without massive subsidies these projects are not economically feasible. Many aren’t even with massive subsidies.

In downtown Dallas, developer Wolfe Investments seeks to convert an 18-story, 1950s office tower into residential apartments, but has recently been fighting off foreclosure from its lender, Thistle Creek Partners, court records show. 

Developers of One Camelback, a 200,000-square-foot office building in central Phoenix, are trying to convert it into what would be one of the city’s most expensive rental-apartment properties. A website advertises $8,000-a-month apartments, with floor-to-ceiling windows and crystal-clear views of nearby mountains.

But the developers, Sagamore Capital and partners defaulted on a loan of about $70 million. The project’s lender, Delphi Financial Group, has moved to foreclose. An auction of One Camelback is set for later this month, according to documents filed in Maricopa County, Ariz.

Biden Throws $45 Billion in Federal Funds to Convert Offices into Homes

On October 29, I commented Biden Throws $45 Billion in Federal Funds to Convert Offices into Homes

Questions abound. Assume you can convert offices into homes, who wants to live in them? Is a tear down cheaper?

The government has 1,500 office buildings nationally and leases on almost 200 million square feet of additional space that it does not need. Instead of canceling leases and selling the real estate, it’s going to convert them into clean energy spaces.

With enough subsidies, developers will try nearly anything. Then when the projects fail, the developers ask for more money.

How is this Being Paid For?

Taxpayers of course. But Biden is funneling $45 billion from clean energy incentives in the ridiculously named Inflation Reduction Act (IRA) into housing conversions.

You might also be wondering what this has to do with clean energy, and the answer is nothing. The questions keep piling up and I have answers.

What’s Really Going On Here?

Biden is hoping to spread the IRA dollars around to buy more votes.

But to do so, he is taking money away from his other pet projects to fund the idea of the moment. His idea of the moment is to do something about the price of rent.

Biden Trails Trump in Five of Six Battleground States

Polls say Biden is in serious trouble and those polls are very believable for reasons I explain.

For discussion, please see Five Alarm Bell – Biden Trails Trump in Five of Six Battleground States

One of the more amusing stats in the poll is voters under 30 favor Mr. Biden by only a single percentage point. And a majority of voters saying Mr. Biden’s policies have personally hurt them.

Housing helps explain that.

CPI Rises More Than Expected as Rent Jumps Another 0.6 Percent

CPI data from the BLS via the St. Louis Fed, chart by Mish

I repeat the core key theme for something like two years now. People keep telling me rents are falling, I keep doubting.

The doubters have it correct again.

On October 12, I noted CPI Rises More Than Expected as Rent Jumps Another 0.6 Percent

Rent of primary residence, the cost that best equates to the rent people pay, jumped 0.6 percent. Rent of primary residence has gone up at least 0.4 percent for 26 consecutive months!

Supposedly, the price of new leases is declining. But new leases are a small slice of the market. Most people do not move. And the irony is falling prices on new leases makes these conversions increasingly unfeasible without bigger and bigger subsidies.

It is not the wealthy who make up the majority of renters. So rent alone is fueling the pain that shows up in the polls. Factor in food.

A rising stock market and home prices does not help those with no assets. And the poor have no assets.

So Biden is desperate to do something about rent. His funneling of $45 billion from here to there is part of his solution.

He may very well be caught in a Red Queen Race where the more he tries the worse he looks.

Wake Up Mr. President, Consumers Do Not Want Not EVs

On October 16, I commented Wake Up Mr. President, Consumers Want Hybrids, Not EVs

A better title would have been Wake Up Mr. President, Consumers Don’t Want EVs

While the President harps about how great things are, consumers don’t see it that away and I have been covering all the reasons why.

This office to apartment idea is nothing more than throwing money at failed big cities hoping to buy more votes. Since consumers don’t want EV’s Biden’s plan is to quietly shift the spotlight to rent.

Unfortunately for Biden, $45 billion does not buy as many votes as it used to.

The post Whats up President Biden, About Your Plan to Waste $45 Billion on Housing Conversions – MishTalk appeared first on DAILY SAN FRANCISCO BAY NEWS.

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Dive Brief:

• The Biden administration on Friday threw its support behind efforts to turn empty commercial buildings into housing, announcing new federal resources to support commercial-to-residential conversion projects.
• New financing, technical assistance and guidance for states, localities, transit agencies and developers are among the new resources. The U.S. General Services Administration will also expand efforts to sell empty federal buildings that could be repurposed into housing.
• U.S. office vacancies reached a 30-year high of 18.2% in the second quarter of 2023, taking a toll on local economies, according to the White House. It said that converting these buildings into residencies could ease the affordable housing crisis and, if done with the climate in mind, drive down greenhouse gas emissions.

Dive Insight:

The high commercial real estate vacancy rate is a lingering symptom of the COVID-19 pandemic, which “forced Americans to change how they live and work, with ripple effects felt across the economy,” according to the U.S. Council of Economic Advisers. U.S. workers now go into the office 30% less than they did pre-pandemic, about 3.5 days a week.

This trend has taken a toll on the businesses the workers in those offices used to support, from restaurants and convenience stores to dry cleaners and hair salons. Many cities, such as Seattle and San Francisco, have devised strategies of their own to revive wilting downtowns. And the number of adaptive reuse projects in the U.S. multifamily pipeline has reached an all-time high, with office-to-multifamily conversion making up the majority of multifamily units under construction.

Turning offices into housing is more complex, however, than switching out desks for beds. Office building design doesn’t always lend itself to logical apartment layouts with adequate natural light. The plumbing and HVAC systems are often not set up to serve multiple residential units. Some commercial developers have also complained that conversion projects face governmental hurdles, including zoning and environmental regulations.

The new federal effort to support commercial-to-residential conversion includes a guidebook on available federal resources, including low-interest loans, loan guarantees, grants and tax incentives. The White House plans to hold training workshops this fall for local and state governments, along with private sector players, to learn how to use the federal programs the guidebook outlines. The White House is encouraging state, local, tribal and territorial governments to identify public tools and land disposition opportunities to support conversion projects. 

Multiple federal agencies released subject-specific guidance on adaptive reuse as part of the announcement. The Energy Department launched a toolkit on creating zero-emissions housing from commercial buildings, while the Transportation Department released guidance on how states, localities and developers can finance conversation projects near transit with two existing federal programs: the Transportation Infrastructure Finance and Innovation Act and the Railroad Rehabilitation & Improvement Financing programs.

The Housing and Urban Development Department will increase outreach efforts to municipalities and developers looking to use HUD tools to finance conversions. The White House highlighted several HUD grant programs that can be used for conversions, including Community Development Block Grants, the Pathways to Removing Obstacles to Housing program and a research-related grant available to develop case studies that can help other localities better plan conversion projects. 

The White House noted in its Friday announcement that the American Planning Association is expanding its work with the planning directors of the nation’s 30 largest cities to include new programs on commercial-to-residential conversions. Plus, the National Association of Counties is working with counties pursuing commercial-to-residential conversion projects to develop a policy paper for county officials interested in pursuing similar efforts.

The post White Home advances office-to-residential conversions with new sources appeared first on DAILY SAN FRANCISCO BAY NEWS.

Environmental protection usually requires regulations. But sometimes the market really can solve problems when the law gets out of the way, as may be happening in the commercial real estate market.

Post-pandemic, there’s a shortage of urban housing, and an overabundance of empty office space. Although zoning laws often present a barrier, some savvy developers are eyeing those office towers for redevelopment as apartments. It could be more than just a financial win, because dense urban housing has a smaller environmental footprint than the suburban alternative.

The pandemic forced companies and employees to find ways to make work-from-home work. Now employers are trying to bring people back to the office – 90% of companies plan to require employees to return to the office in 2024, despite ambiguous data on remote workers’ relative productivity. Employees aren’t really on board with returning to office life. In what some are calling the Great Resistance, workers are ignoring orders and continuing to work from home – something that 40% of managers are letting slide – or simply finding new jobs that don’t require as many days in the office.

As a result, office buildings in major cities are sitting empty or underused. Manhattan has an office vacancy rate of 22.4%. In San Francisco, the rate is 31.8%. With national vacancy rates – which only account for unleased space – hovering above 20% and a third of all current office leases expiring by 2026, a financial crisis is brewing in downtown real estate. Commercial rents are plummeting as interest rates have doubled, leading to more mortgage defaults and shrinking municipal budgets that rely on property tax revenue.

Housing Crisis

In many parts of the country, urban sprawl has ensured an abundance of affordable housing (while generating a different set of problems). Those problems, combined with the amenities of cities, have made successive generations less enamored with the suburbs. Millennials are most likely to prefer urban living, even as they age. For workers of all ages who are returning to the office full time, working from home may have made their long pre-pandemic commutes less tolerable, increasing the appeal of downtown housing.

However, many of the country’s metropolitan areas have constrained housing inventories that drive prices higher than the people who most want to live there can afford. In a recent study, San Antonio, Dallas, and Orlando had the biggest housing shortages. In New York, 70,000 people sleep in shelters every night, with nonexistent vacancies in affordable apartment stock. Nationwide, the country is missing about 3.8 million units of housing including both rental and sales demand.

Not a Slam Dunk

For all the hypothetical benefits of office conversions, there are some very real obstacles. In many cities, developers are hindered by zoning laws and the real or perceived obstacle of “red tape.” Most office buildings are not physically suitable for conversion. Many have too much space far from windows, windows that don’t open, or insufficient plumbing. In Seattle, where 112,000 units of new housing are needed in the next two decades, fewer than 100 area buildings are considered optimal candidates for conversion.

More than half of the needed units need to be affordable to people making $62,000 or less per year, which leads to the biggest obstacle. Converting commercial buildings for residential use is expensive. To cover the cost, converted apartments are not likely to qualify as “affordable.” Even at market rates, conversions may not make economic sense for developers without subsidies – which can be a hard sell, even if there is the potential to save downtown neighborhoods.

However, incentives don’t have to take the form of tax breaks. Looser zoning and building code rules and streamlined permitting could also help tip the balance on conversion projects. Some conversions could also qualify for federal funding for climate adaptation in the Inflation Reduction Act. If you would consider living in a converted office building or even support the idea of office conversion projects, tell your local lawmakers. County and city officials need to know that the attitudes that led to the housing shortage in the first place no longer apply in their community.

Triple Win

Besides the financial benefit of those federal funds, there is the environmental benefit of upgrading inefficient old buildings into efficient new ones. Construction emissions are lower for building conversions than for new construction. And apartment dwellers have a smaller carbon footprint than their suburban neighbors, thanks to lower square footage, shared walls, and shorter commutes.

Office conversions are unlikely to solve either the climate crisis or the housing crisis. But they could make a difference. In New York City, nearly 80 office buildings have already been converted to apartments. Those 80 buildings are providing homes for hundreds of people, who in turn are supporting downtown businesses that once relied on office-working customers. An area that was once occupied only during working hours has become a vibrant neighborhood.

The post Workplace Conversions May Be the Key to City Renewal appeared first on DAILY SAN FRANCISCO BAY NEWS.

The glut of empty and obsolete office buildings and the severe housing shortage in the U.S. have prompted calls from numerous quarters for widespread office-to-residential conversions—one of the most recent coming from the Los Angeles Times’ editorial board. Meanwhile, states and cities are pushing legislation and policies to incentivize such deals.

From a supply and demand standpoint, the idea makes sense as hybrid work becomes the norm. But true candidates for residential conversion are the exception rather than the rule: Costly design interventions, structural integrity, mechanical system age and performance, floorplate size, zoning regulations, the cost basis and the nature of the neighborhood—any of which can foil a conversion—are just some of the initial variables developers must assess when considering a deal.

READ ALSO: What Hinders Office Space Conversions?

What’s more, some states and cities are demanding that buildings live up to new sustainability measures to fight climate change, suggested Julie Whelan, global head of occupier thought leadership & research consulting with CBRE in Boston. That poses yet another challenge.

“There are some older office buildings that are not going to be able to achieve these new standards, and they are going to have to be dealt with,” she stated. “They’re not always going to have a highest and best use and will just have to be razed.”

At a minimum, developers should plan on spending $500 to $600 per square foot on an office-to-residential conversion, said Richard Jantz, an executive managing director with Cushman & Wakefield in New York. Plus, on a square-foot-basis, the average rental rate for an apartment is about half that for run-of-the-mill office space.

READ ALSO: As Hybrid Work Expands, Coworking Is No Longer the Exception

Hence, not only are developers incurring costs on the conversion, but they also cannot increase their cost basis to generate more revenue from potential residents, he added. That means buying conversion candidates at a discount is paramount. Yet such financial wildcards don’t take into account the tight-fisted credit environment at the moment.

“It seems so simple—you’ve got space that people aren’t using and people who need space to live in, so why not connect the dots?” Jantz said. “But I honestly think office-to-residential conversions are probably the least realistic version of adaptive reuse.”

Needle in a haystack

Gensler worked with PMC Property Group on Franklin Tower Residences, a project that converted the former GlaxoSmithKline headquarters into 360 apartment units and opened in 2019. Image courtesy of Robert Deitchler/Gensler

Recent research and tools developed to assess the viability of such projects support that assertion. Looking at completed, in-progress and planned conversions of offices into any alternative use since 2016, CBRE found that 91.1 million square feet has been or would be removed from the market. That’s less than 2 percent of total U.S. office supply, reported Jessica Morin, research director who specializes in office for CBRE’s Americas Research team.

Meanwhile, when assisting the city of Calgary to develop a plan to reuse largely vacant downtown offices in 2018, architecture firm Gensler created a tool to gauge reuse potential by analyzing building and market characteristics, including the state of mechanical, electrical and plumbing systems, the window-to-wall ratio, the size and shape of the floorplates, and surrounding residential rental rates.

READ ALSO: How Vacant Office Spaces Get New Life

The firm found that about three out of 10 buildings in the 43 million-square-foot market had the potential to become apartments, said Kelly Farrell, a principal with Gensler & global leader of its residential practice. “Depending on an owner’s basis in the building, that number may be even lower,” added Farrell.

To help fuel conversions where it makes sense, Calgary is providing grants of $75 per square foot of office space that will become housing. Gensler is now helping U.S. cities formulate similar strategies as empty and underutilized or obsolete buildings contribute to falling downtown property values and diminishing tax revenues, Farrell also mentioned.

“The fundamental question centers on how incentive programs will work, because converting these buildings is not a simple task,” explained Farrell, whose firm worked with PMC Property Group to convert the former GlaxoSmithKline headquarters tower in Philadelphia into 360 apartment units in 2019. “It’s much simpler to develop a new building from the ground up than it is to rip out the guts of a building and do a conversion.”

The Franklin Tower Residence project. Developer PMC Property Group changed out the full mechanical, electrical and plumbing systems, which freed up room to create a rooftop lounge and outdoor deck. Image courtesy of Robert Deitchler/Gensler

Helping hand

Some cities and states are already crafting incentive policies. In June, San Francisco began seeking developer input on how the city could help speed up or enhance conversions through regulatory changes, financial incentives and other means. That followed approval of legislation that provides zoning and fee exemptions, among other benefits, to help streamline the reuse process.

“The number one thing that is needed for conversion projects is city support,” said Thomas Cox, founder & managing principal of TCA Architects. “We’re seeing a lot of the tech industry meltdown, especially in the Bay Area, and San Francisco needs to get people back downtown.”

To the south, Los Angeles continues to expand and modify a 1999 adaptive reuse policy that has fueled the conversion of some 12,000 new housing units by expediting approvals and relaxing code and zoning requirements, according to the city’s planning department. That program was in place when Forest City Enterprises converted three office buildings that added 745 downtown units to the market early this century, said Cox, who worked on the projects. The properties were largely acquired at discounts, which helped financial feasibility. Cox sees a similar dynamic at play today.

Currently one of his developer clients pursuing conversions is negotiating with a bank that took three heavily vacant downtown Los Angeles office buildings back to either acquire the properties or partner with the lender in a deal. The goal is to turn one of them into housing after moving tenants into another building. If it succeeds, the developer will repeat the process, Cox said.

“What we’re seeing now is a very large change in ownership of these office buildings—lenders are taking them back and are discounting the pricing,” he said. “That’s opening the door for developers to step in and consider a residential conversion.”

The Franklin Tower Residence project spread out amenities such as a media room, basketball court and spin studio throughout the building. Developer PMC Property Group changed out the full mechanical, electrical and plumbing systems, which freed up room to create a rooftop lounge and outdoor deck. Image courtesy of Robert Deitchler/Gensler

In limbo

The office-to-residential conversion theme is hardly new and tends to emerge in the commercial real estate cycle’s recession phase. Following the savings and loan crisis, New York City launched the 421g Tax Abatement program in 1996 to facilitate office-to-residential conversions in downtown Manhattan. The initiative helped convert roughly 13 million square feet, or about 13 percent of the downtown office market, into 12,865 units in 11 years, according to New York’s Citizen Budget Commission.

Such incentives don’t exist today, however. Despite support from the governor and New York City Mayor Eric Adams, a proposal geared toward facilitating residential conversions south of 60th Street in Manhattan failed to clear New York’s General Assembly this year. That could change if more office owners can’t refinance their debt and a mass of assets wind up with lenders, Jantz noted. But for now, he suspects lenders are addressing troubled loans on a one-off basis.

“My gut tells me that lenders don’t see a reason to change that approach. I think everybody believes that people are going to eventually return to the office in a more robust and regular manner,” he reported. “Going to the office five days a week may not come back, but if you have people working the same three to four days during the week, you’re going to need office space.”

Read the August 2023 issue of CPE.

The post The Difficult Process of Workplace-to-Residential Conversions appeared first on DAILY SAN FRANCISCO BAY NEWS.

Downtowns are struggling with twin problems: too much empty office space and not enough housing.

So why not just turn offices into apartments?

Well, it turns out that in practice, “adaptive reuse” is complicated. And expensive. Still, many major cities are giving it a try — but not necessarily at a scale that will make a serious dent in either problem.

Problem No. 1: too much office space

At the start of the pandemic, a lot of office workers began to work from home. More than three years later, it’s become obvious that many are never going back to the office full time. In July, 12% of full-time employees were working remotely and 29% were in hybrid arrangements, according to the most recent survey from the Working From Home Research Project (run jointly by several universities).

When workers stay home (and as tech workers are laid off), companies begin shrinking their office footprint, shedding leases as they come to term. As a result, office vacancies remain high: The U.S. office vacancy rate in July was 17.1%, an increase of 1.8 percentage points since July 2022, according to the most recent National Office Report by CommercialEdge, a commercial real estate software company that tracks office vacancies.

So while there is unused office space, converting it into housing involves lots of money and lots of red tape. And there may be fewer practical opportunities than you’d think. Steven Paynter, an architect at Gensler, a San Francisco-based architecture firm, created an algorithm to assess the feasibility of conversions and found that only 30% of existing offices in the U.S. and Canada would be structurally viable for conversion.

Still, many major cities are undergoing office-to-housing conversions — or are, at least, proposing them — and they include Atlanta, Chicago, Houston, San Francisco, Seattle and Washington, D.C. In New York City, a developer is transforming a lower Manhattan building that once housed both the New York Daily News and JPMorgan Chase & Co. into 1,300 apartments. This helps problem No. 2, but perhaps not in a significant way.

Problem No. 2: not enough housing

This is referring particularly to affordable housing. This was a long-term trend that the pandemic — particularly early on, with its concurrent spikes in rent prices and unemployment — only made worse. The National Low Income Housing Coalition says there’s a shortage of 7 million affordable homes for 10.8 million extremely low-income families. Meanwhile, the largest group of would-be home buyers are middle-income earners who can only afford 23% of listings on the market, according to a June housing analysis by the National Association of Realtors and Realtor.com.

More housing is the obvious answer to a housing shortage and for lowering purchase and rental costs — and also for potentially helping to ease a crisis of urban homelessness. But urban areas, specifically downtowns, have scarce land and an abundance of zoning regulations.

So, can office-to-housing conversions play a material role in solving the housing crisis? And will these conversions bring new energy to depressed downtowns? To gain insights into these big questions, NerdWallet turned to Tracy Hadden Loh, a fellow with The Brookings Institution’s Brookings Metro — a nonprofit think tank — and co-author of the paper “Myths about converting offices into housing — and what can really revitalize downtowns.”

We discussed what’s happening in downtowns, the challenges with office-to-housing conversion, what needs to happen to revitalize city centers, the affordable housing crisis and why suburbs might be the sleeper opportunity to convert office buildings into housing.

The following interview has been edited and condensed for length and clarity.

NerdWallet: This isn’t the first time cities have seen office vacancies in downtowns and other areas, too. Can you point to some other instances and explain why this situation is different?

Tracy Hadden Loh: When really devastating disruptions happen, it causes these fluctuations in the office market. But in the past, the office worker has recovered. Another really different example of there being a glut in the office market is that in the 1980s, the real estate industry functioned a little bit differently than it does today because of some differences in the U.S. tax code. And during that time period in a bunch of markets, developers built what’s called spec office — spec being short for speculative. So they just built office buildings even though they didn’t have a tenant who had already told them they were going to move into the building. They were just building it and they were like, “Go do something with it.”

NerdWallet: If you build it, they will come.

Tracy Hadden Loh: Right. And so I’m sure you can imagine that this caused a huge glut of oversupply in the market because people just built all these office buildings and were just like, “Something is going to come along,” and something didn’t always come along. And so a lot of this product just kind of sat there. But eventually it was taken up by growth and the market.

It didn’t sit there empty for literally forever; it just took time. Eventually somebody leased it and new construction stopped. Then [governments] made changes to the tax code to stop the speculative building.

What’s different about today, as opposed to those other situations that I mentioned, is that it’s happening at a time when there is this structural shift in demand for office space because of the flexibility of remote work. There’s been this big drop in the number of square feet per worker that office employers are using now. And then there are higher interest rates, as well. Those are an unprecedented combination of factors that we haven’t seen in the office market happening at the same time.

NerdWallet: Does it seem like office building owners are trying to wait out office vacancies at this point, or are they looking around and saying “What else can we do?”

Tracy Hadden Loh: It depends on the owner; some are more anxious than others. Some of them are richer than others and can afford to wait longer. If an office owner is like, “I don’t want to wait out a vacancy, then I’m going to maybe take advantage of some subsidies from the government or tax breaks — whatever it’s going to be.” But it’s still going to be pretty expensive to convert offices into housing. So you’d have to make it worthwhile to convert.

NerdWallet: What does it take to make it pencil out for a developer?

Tracy Hadden Loh: Everything is expensive: the cost of labor is higher, supply chains are in trouble, materials are more expensive than ever. Everything’s expensive — even converting your office building into a nicer office building is. Converting it into housing would be expensive. Doing nothing is expensive. It’s just kind of a tough situation right now; we’re in a high-cost environment.

The issue with the office-to-housing conversation is that people are kind of pushing a whole bunch of problems together at once, which won’t necessarily yield a rational solution that matches the problems.

NerdWallet: The report unpacks a lot of myths about housing conversion and in downtown areas especially. One of the myths is that downtowns have too many offices when in reality it’s that downtowns have too little of everything else. Can you explain what everything else is?

Tracy Hadden Loh: It’s absolutely housing — just to be clear. But it’s also restaurants, clubs, venues, entertainment venues, sports facilities, schools, hospitals.

NerdWallet: Like all the other amenities as well. That kind of makes up a neighborhood?

Tracy Hadden Loh: I mean, I wouldn’t even describe those as amenities. What do people do all day? It’s a lot more than just work and sleep, right? Work and sleep means offices and housing. But what about everything else? The trend, globally, is that productivity is going up. People have more time and more money to spend doing things that aren’t working or being at home.

I think sometimes it’s easy for people to just say there’s nobody downtown. It’s like a ghost town and they’re not necessarily thinking about the other businesses and things that were supported by community workers, for example, as well as the city transit systems and how vacancies are impacting those things as well.

NerdWallet: If you start bringing in either new housing or converting housing, is the logical next theory here that it will bring the entertainment centers, it will bring the venues, it’ll bring the hospitals and schools and other things like that to an area — a different kind of “if you build it, they will come” scenario?

Tracy Hadden Loh: I do think that adding housing in and around downtowns makes sense. Residential is actually a pretty low density land use compared to other land uses like office or retail or entertainment. Land in this central, highly accessible area is very scarce and that’s why all this stuff is in these locations, right?

But generally speaking, downtown is all about proximity and accessibility. And so making sure that there’s a really good supply of housing near all the stuff absolutely makes sense. But the housing is not a substitute for the stuff.

NerdWallet: Let’s talk about affordability. Usually when you build more housing, rents will go down, right?

Tracy Hadden Loh: That is how it works.

NerdWallet: But creating new housing in downtown areas and bringing in all these other new things, new businesses, etc., it seems like it could draw young professionals with disposable incomes away from other areas of cities and potentially alleviate some of the rent pressure in the areas they left. Is that kind of a hypothesis accurate or is it like not quite there?

Tracy Hadden Loh: Yeah, it makes sense and that’s what happened the last time that cities built a bunch of new housing in and around their downtowns. But it also depends on what you build, right? Like you mostly build stuff that’s for rent that is actually going to attract and serve a different segment of the population. If you build stuff that’s for sale and you build smaller units then that also serves a different segment of the population.

NerdWallet: I know some cities also require a percentage of new housing to be affordable housing with below market rents. But a small percentage of new housing while adding much more potentially expensive housing in downtowns seems like a drop in the bucket in terms of meeting affordable housing needs. Can you speak to the myth of office-to-residential conversion as the key to solving the housing crisis?

Tracy Hadden Loh: The housing crisis at its core is caused by not having enough housing where all the jobs are and there’s no way to subsidize our way out of that or get somebody else to pay for the solution. We just need more housing near where jobs are and that’s it. So office-to-housing conversion can provide us some small percentage of that, like maybe 10%. But we need to also build the other 90%.

We got into this situation by not building enough housing for literally decades in the places where there was a lot of job growth. The only way out is to build a lot of housing — like decades’ worth.

We’re certainly not going to get out of it by using public money to create some tiny number of artificially cheap housing units some very lucky people will get to live in — because what about everybody else?

NerdWallet: That’s why those lottery systems are pretty frustrating — all it is showing you is that there just isn’t enough housing.

In cities that are supporting office-to-housing conversions, are those cities going to be easing, permitting or regulatory provisions that would allow for the creation of weirder apartments — I mean those that aren’t 100% fitting code like having windows in bedrooms? I just hear people saying, “Why can’t they just turn all of these empty offices into housing?” And all I can think is of the plumbing alone. Housing and commercial spaces are just very different.

Tracy Hadden Loh: If we made it easier to build housing, people would build more of it and then more people would have places to live. It is kind of a no-brainer. And yet we don’t do it because we have this incumbent bias where we’re like, “Well, I have somewhere to live.” And so new housing would be “for other people.”

NerdWallet: Seems like it comes down to a space issue, too, right? It’s always easier to say let’s build up, except there are areas with limits to how high you can build, for example.

Tracy Hadden Loh: In the most accessible and highly desirable areas, location is scarce. Yes, that’s one of the reasons why building housing there is expensive.

NerdWallet: So empty offices are sitting on pretty expensive land. Would it just be easier, with the challenges to convert to housing, to knock down a building and restart with the intent for it to be residential? Or is that impractical?

Tracy Hadden Loh: You have to keep in mind — especially with the cost of materials right now — that even when you do the demo, all you can salvage is the steel and the concrete slab. Steel and concrete slabs are expensive. So it would have to be just like a very, very particular kind of a building for demolition to be worth it to save any money.

But there are a lot of low-rise offices in suburban locations that are highly accessible. These suburbs are desirable places to live. That’s the real office-to-housing conversion opportunity.

Those will be many orders of magnitude bigger than the downtown conversion opportunity. And it will be primarily driven by demo. The offices will just be torn down and then much taller apartments will take their place.

NerdWallet: And they’re usually near those desirable areas that are also near some kind of public transportation.

Tracy Hadden Loh: Yeah, because that’s where the jobs were.

NerdWallet: What would actually need to happen to alleviate unaffordability in urban centers that lock out middle-income and lower-income populations?

Tracy Hadden Loh: There are two things that are going on right now at the same time. One is we’ve got to build housing near where our jobs are in order to address demand. And we need to build lots and lots and lots of it. And there are some metro areas that are doing this, like Austin, Miami, Dallas and Houston. I’m not saying they couldn’t be doing even better, but they’re building a lot in sunbelt metros. They have a lot of jobs, their economies are growing and their housing is also growing, so they’re remaining affordable.

The other thing is that jobs can relocate. People can leave high-cost areas where there’s nowhere for their workers to live. Right. And they can go somewhere else. The rise of remote work increases mobility.

NerdWallet: And we’ve seen some of that already.

Tracy Hadden Loh: Yes, this is not a hypothetical.

NerdWallet: We saw an acceleration of that movement as well — the rise of remote work during the pandemic is why a lot of our offices are vacant in downtown areas. But also companies are probably wondering, “Why am I going to be leasing this when my workers aren’t even living here?”

Tracy Hadden Loh: Yes. Employers are going to locate where it makes sense for them to locate. They want to locate in places where they’re going to be productive and where they can get workers. And that’s the puzzle that employers are always trying to solve. For the innovation and knowledge economy, that’s still going to be in cities. And so what cities need to do is increase their competitiveness and lean into their inherent value proposition, which is housing and jobs. It’s not just jobs and it’s not just housing. But that’s what suburbanization was all about: “What if we have one set of jurisdictions that are just housing and another jurisdiction that just does jobs?” And people don’t want to live this way.

NerdWallet: What are city and state governments doing to allow for office-to-housing conversions and more housing, in general?

Tracy Hadden Loh: Taking a comprehensive look at the zoning, the building code, the tax structure, permitting and fees.

NerdWallet: Because there’s a lot of red tape involved.

(Photo by Justin Sullivan/Getty Images News via Getty Images)

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SAN FRANCISCO — On Friday, June 2, San Francisco District Attorney David Chiu announced in a news release that he is filing a lawsuit against the landlord of four Bernal Heights apartment buildings alleging unauthorized works, illegally converted housing units and significant fire safety issues have. The lawsuit was filed against 320 Alemany LLC and its sole manager, Jack Tseng, who profited for years from renting illegal and unsafe units to San Francisco tenants.

“These properties pose a serious fire hazard,” Chiu said. “After dozens of illegal conversions, the landlord has made a significant profit from the same tenants he put at risk. We are taking steps to ensure the safety issues are addressed and the landlord held accountable.”

“The violations set forth in this complaint against the owner are alarming and serious,” said San Francisco regulator Hillary Ronen. “The city must do everything in its power to hold this owner accountable for his actions and to vindicate the tenants in these units. The Oversight Board recently passed legislation I wrote to increase the fines and penalties for such offenders, and I am pleased that they are already being applied in this case. We must continue to make it clear as a city that knowingly disregarding our building and fire codes will not be tolerated as a cost of doing business for developers and will be punishable by a fine to the maximum extent permitted by law.”

The property at 316-328 Alemany Boulevard consists of four adjacent multi-unit apartment buildings where the owner illegally converted 13 approved housing units into 32 illegal housing units, resulting in violations of building codes and safety hazards on the property. San Francisco has issued 26 notices of violations (NOV) of building, electrical, fire, health, housing, zoning, and plumbing codes. The owner didn’t heal any of the NOVs.

Some of the units have bedrooms with no emergency exits, which is a concern in the event of a fire. The fire hazard is so great that the Department of Building Inspection issued emergency orders requiring the immediate evacuation of two of the units. Other violations include blocked emergency exits, a fire escape that doesn’t reach the bedroom window, extensive unauthorized work, and pest infestations.

The lawsuit alleges that the defendants caused a public nuisance and violated the state housing code, several municipal ordinances and the California unfair competition statute. The SF City Attorney’s lawsuit seeks penalties, fees, and declaratory and injunctive relief to remedy the violations at the property.

The case is City and County of San Francisco and the People of the State of California v. 320 Alemany LLC. and Jack Tseng. Details of the complaint can be found here.

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Anmerkung der UL-Redaktion: Diese spezielle zweiteilige, digital ausgerichtete Reihe über die Umstellung von Büro- auf Biowissenschaften erscheint am Montag, 15. Mai, und Montag, 22. Mai.

Aufgrund einer ausgeprägten Flucht in die Qualität und einer insgesamt sinkenden Nachfrage nach Büroflächen werden ältere Büroimmobilien zunehmend in andere Nutzungen umgewandelt. Laut Jessica Morin, Leiterin der Büroforschung bei CBRE Americas, wird von den 125 Büroumbauprojekten, die derzeit laufen, die Hälfte für den Einsatz in den Biowissenschaften adaptiert.

Der im Vergleich zu anderen Produkttypen hohe Anteil an Büroumbauten in Biowissenschaften ist verständlich, wenn man die Überschneidung dieser beiden Nutzungen bedenkt, meint Devin Bertsch, Projektleiter bei Project Management Advisors mit Sitz in San Francisco. Bertsch, der sich auf die Entwicklung und das Baumanagement im Bereich Biowissenschaften spezialisiert hat, weist darauf hin, dass die zur Labornutzung umgenutzte Grundfläche in der Regel 50 Prozent oder weniger des Projekts ausmacht, Umwandlungen jedoch zu Mieten führen, die mit denen neuer, von Grund auf neu errichteter Biowissenschaftsprojekte vergleichbar sind.

Im ersten Quartal 2021 gab es einen Höhepunkt bei den Life-Science-Umstellungsprojekten, die 41,5 Prozent der hergestellten Laborprodukte ausmachten, sagt Taylor Stucky, Associate Research Director für Life Sciences bei CBRE. Weitere 31 Prozent der im vierten Quartal 2022 ausgelieferten Life-Science-Fläche waren ebenfalls Umbauten.

Dieses zweistöckige Bürogebäude befindet sich in der Via Merida 120 und wurde 1998 erbaut. Es erstreckt sich über eine Fläche von 6,7 Acres (2,71 ha) und war früher die Unternehmenszentrale von Wellpoint Health Networks. Gray Matter, die Life-Science-Initiative von Graymark Capital, hat den Architekten BAM Creative mit der Entwicklung eines stufenweisen Umstellungsplans beauftragt. Nach der Fertigstellung wird das Anwesen zu 60 Prozent über laborfertige Flächen mit verbesserter Mechanik, Elektrik und Sanitäranlagen sowie zu 40 Prozent über neu errichtete kreative Büroflächen zur Unterstützung des Labors verfügen. (CBRE)

„Wo derzeit Umbauten stattfinden, scheint stark von der Dichte der U-Bahn abzuhängen“, sagt Stucky. New York City weist mit 77 Prozent der in der Pipeline befindlichen Produkte, die auf Konvertierungen zurückzuführen sind, den höchsten Anteil dieser Projekte auf, gefolgt von Washington, DC/Baltimore, Denver-Boulder und Boston-Cambridge.

Jason Utah, leitender Projektmanager beim in Chicago ansässigen Gewerbebauunternehmen Skender, stimmt dem zu und weist darauf hin, dass die Kostenvorteile bei der Umwandlung von Bürogebäuden in Biowissenschaftsflächen mindestens 50 Prozent der Kosten für neue Entwicklungen einsparen. Die meisten Bürogebäude verfügen bereits über hohe Deckenhöhen und eine bestehende Gebäudehülle. Und während elektrische und andere Versorgungseinrichtungen in der Regel auf robustere Systeme aufgerüstet werden müssen, bietet die Tatsache, dass sie bereits im Gebäude vorhanden sind, einen großen Zeit- und Kostenvorteil.

Laut Matt Gardner, Leiter Life Sciences Advisory bei CBRE Americas, ist der Anstieg der Umwandlungsaktivität auf historisch hohe Laborleerstandsquoten zurückzuführen, da auf dem Höhepunkt des aktuellen Immobilienzyklus in den Jahren 2021 und 2022 der Leerstand gegen Null ging. „Der Druck, leerstehende Bürogebäude umzuwandeln, stieg mit der zunehmenden Zeitspanne bis zur Fertigstellung von Neubauten“, sagt er. Dieser Druck hat jedoch im Jahr 2023 angesichts des sich verlangsamenden Labormarkts und der Lage der Gesamtwirtschaft nachgelassen.

Dennoch haben die medizinischen Durchbrüche des letzten Jahrzehnts sowie die durch die Pandemie ausgelöste Beschleunigung der pharmazeutischen Entwicklung eine Ära beispiellosen Wachstums sowohl der öffentlichen als auch der privaten Finanzierung der biowissenschaftlichen Forschung und damit der Nachfrage nach Laborflächen eingeläutet. Tatsächlich prognostiziert ein aktuelles Whitepaper von Forschern des in Houston ansässigen Unternehmens Hines einen Anstieg der Nachfrage nach Life-Science-Immobilien um 33 bis 50 Prozent im nächsten Jahrzehnt. Dies würde einer neuen Nachfrage von insgesamt 45 bis 65 Millionen Quadratfuß gegenüber dem aktuellen Life-Science-Bestand von 131 Millionen Quadratfuß entsprechen.

Hazel Technologies hat die 13. Etage eines Bürogebäudes mit mehreren Mietern im Chicagoer Fulton Market in Laborräume für Lebensmitteltests umgewandelt.

Konvertierungstreiber

Zwei Hauptgründe für die Umstellung bestehender Gebäude auf neue Nutzungen sind Bedenken hinsichtlich ESG und der Zeit bis zur Fertigstellung, meint der Architekt Tim Mustard, Direktor und Direktor für Geschäftsentwicklung beim Architekturbüro TCA Architects mit Sitz in Orange County, Kalifornien, das sich auf die Neugestaltung verschiedener Gebäudetypen spezialisiert hat von Immobilienvermögen zur Wohnnutzung.

„Umbauten fördern die Nachhaltigkeit, weil wir vorhandene Baumaterialien verwenden und Abfall und Kohlenstoff reduzieren, indem wir verhindern, dass Baumaterialien auf Mülldeponien landen“, sagt er. „Außerdem lassen sie sich viel schneller auf den Markt bringen, insbesondere in Märkten mit hohen Barrieren wie Südkalifornien und der San Francisco-Bay Area. Bei bestehenden Strukturen gibt es so viele rezeptfreie Genehmigungen nach eigenem Ermessen, dass sich die Zeit bis zur Erlangung von Genehmigungen von zwei bis drei Jahren auf einige Monate und die Lieferzeit von fünf bis sieben Jahren auf zwei bis drei Jahre verkürzt“, fügt Mustard hinzu.

Gebäudeeigentümer und -entwickler nutzen ganze Bürogebäude um und schaffen vorgefertigte Laborflächen in vertikalen Bürogebäuden mit mehreren Mietern, normalerweise auf einer oder zwei Etagen. Der Architekt Brooks Slocum, Direktor des Full-Service-Design- und Bauunternehmens SGA, der alle Projekte im New Yorker Büro des Unternehmens überwacht, weist darauf hin, dass die Menge an Life-Science-Raum in vertikalen Gebäuden durch die Belüftungskapazität begrenzt ist, die manchmal durch leerstehende Gebäude erreicht wird B. in Schächten oder nach Standorten, an denen vertikale Bereiche mit der geringsten Beeinträchtigung des Gebäudes geschaffen werden können.

Budd Bioworks ist ein Life-Science-Campus für die Produktion in Philadelphia mit Laborflächen für mehrere Phasen des Ökosystems der Arzneimittelentwicklung.

Kosten und Mieten

Laut einem CBRE-Bericht aus dem Jahr 2022 liegen die Kosten für den Bau von Grund auf in den drei größten Life-Science-Märkten – San Diego, San Francisco und Boston-Cambridge – zwischen 675 US-Dollar pro Quadratfuß und 1.200 US-Dollar pro Quadratfuß, hinzu kommen noch 300 US-Dollar 650 US-Dollar pro Quadratfuß für die Ausstattung von Mieterlabors.

Laut dem in Boston ansässigen Robert Richards, der das Cambridge/Urban-Team des Immobiliendienstleistungsunternehmens Cushman & Wakefield leitet, kostet der Umbau eines Büros in ein Labor hingegen durchschnittlich etwa 300 US-Dollar pro Quadratfuß für Umbau und Mieterausbau.

Jon Wright, JLL-Vizepräsident und Biowissenschaften sowie Leiter für Projekt- und Entwicklungsdienstleistungen, sagt, dass die Kosten je nach den vorhandenen Merkmalen des umzunutzenden Gebäudes und der Art des Labors, das der Eigentümer bauen möchte, variieren. Beispielsweise steigen die Kosten, wenn der Bau eines Speziallabors oder Vivariums geplant ist, eines geschlossenen Bereichs, in dem Tiere oder Pflanzen zu Beobachtungs- oder Forschungszwecken gehalten werden.

Laut Slocum von SGA variieren die Kosten auch je nach Büro-zu-Labor-Verhältnis. Einige Life-Science-Umbauten erfolgen im Verhältnis 40/60 vom Büro zum Labor, andere wiederum im Verhältnis 60/40 vom Büro zum Labor. Bei der Berechnung der Kosten ist es jedoch üblich, Annahmen zu treffen, die auf einer 50/50-Büro-Labor-Konfiguration basieren, doch in den letzten Jahren ist bei der Größe des Laborraums ein leicht steigender Trend zu verzeichnen, bemerkt Morin von CBRE.

Bertsch von Project Management Advisors sagt, dass ein schlechter Zustand des Gebäudes, einschließlich Wartung, Nichteinhaltung von Vorschriften und andere unvorhergesehene physische Probleme, die Kosten ebenfalls erheblich erhöhen können.

Thor Equities hat 95 Greene neu positioniert, ein dramatisches Neupositionierungsprojekt zur Schaffung der ersten laborfertigen Life-Science-Immobilie in Jersey City.

Ein Mietaufschlag und längere Mietverträge im Zusammenhang mit Forschungs- und Entwicklungstransaktionen sowie eine stetige Nachfrage sind weitere Anreize für die Umstellung von Büroimmobilien auf Laborflächen. Joseph Fetterman, Executive Vice President und Mitglied des nationalen Lenkungsausschusses für Gesundheitswesen und Biowissenschaften der Life-Sciences-Praxisgruppe von Colliers, stellt fest, dass Laborflächen je nach Standort anderthalb- bis zweieinhalbmal höhere Mieten als Büroflächen bieten.

Richtiger Standort, richtiges Gebäude

Jon Wright, Vizepräsident und Life-Science-Leiter für Projekt- und Entwicklungsdienstleistungen bei JLL, sagt, dass die Mietprämien in Märkten mit einer Konzentration von Life-Science-Unternehmen und geringen Lagerbeständen am höchsten sind, wie zum Beispiel der Bay Area in Kalifornien und Denver/Boulder. Aber auch in diesen Märkten ist der Standort von entscheidender Bedeutung, da die Immobilie in der Nähe wünschenswerter Annehmlichkeiten und Universitäten liegen muss, an denen das Talent lebt.

Der Standort innerhalb oder in der Nähe bestehender Life-Science-Cluster ist sowohl für Life-Science-Unternehmen als auch für Wissenschaftler wichtig, da er den Unternehmen Zugang zu Talenten verschafft und Forschern die Möglichkeit gibt, mit gleichgesinnten Fachleuten zusammenzuarbeiten, so der in San Diego ansässige Architekt Darrel Fullbright, LEED Green Associate und globaler Praxisleiter für Entwicklerpraxisgebäude beim globalen Architekturbüro Gensler.

Abgesehen vom Standort ist die Auswahl des richtigen Gebäudes entscheidend für den Erfolg eines Umbaus, sagt Timothy Martin, Geschäftsführer und nationaler Leiter für Life-Science-Property-Management bei JLL, der betont, dass die physischen Eigenschaften eines Gebäudes für die Mieter angemessen sein müssen Wer wird es letztendlich besetzen? „Wir haben erfolgreiche Umbauten in einer Vielzahl von Größen, Standorten und dem ursprünglichen Zweck der Gebäude gesehen“, sagt er. „Letztendlich sind Konvertierungen erfolgreich, weil sie von erfahrenen Teams entworfen, erstellt und durchgeführt werden, die die Bedürfnisse ihrer Endbenutzer verstehen.“

Laut Richards von Cushman & Wakefield beträgt die Miete für Laborflächen in der Gegend von Boston beispielsweise 100 US-Dollar pro Quadratfuß, und umgebaute Gebäude kosten 1.700 bis 1.800 US-Dollar pro Quadratfuß. Aufgrund der hohen Kosten für Laborausbauten haben Life-Science-Mietverträge in der Regel eine Laufzeit von sieben bis 15 Jahren. Eine weitere positive Dynamik für diesen Sektor besteht darin, dass Life-Science-Unternehmen schnell wachsen, sich in der Regel innerhalb von 24 bis 36 Monaten verdoppeln oder verdreifachen und daher letztendlich mehr Platz benötigen.

Fullbright von Gensler weist außerdem darauf hin, dass die meisten Büroarbeitgeber zwar eine hybride Arbeitsumgebung bevorzugen, in der die Mitarbeiter nur drei Tage pro Woche im Büro sind, bei Life-Science-Unternehmen jedoch mehr Gewissheit hinsichtlich der Auslastung besteht. „Wir denken hier, dass man in einem Labor nicht aus der Ferne arbeiten kann.“

Fetterman von Colliers erklärt, dass Investoren in Umbauten in zwei Kategorien fallen: (1) Entwickler/Investoren mit Erfahrung in der Entwicklung von Life-Science-Projekten, die in die Top-Life-Science-Cluster einsteigen oder expandieren möchten, und (2) Eigentümer/Investoren mit Bürogebäuden, die dadurch negativ beeinflusst werden Veränderungen auf dem Büromarkt auf der Suche nach einer Möglichkeit, die Auslastung zu verbessern.

Projekte einer erfahrenen Gruppe weisen in der Regel ein geringes Risiko auf, da diese Entwickler in der Regel über eine gute Kapitalausstattung verfügen und Vermögenswerte zu fairen Preisen mit den richtigen strukturellen Merkmalen für die Umwandlung suchen, schlägt Fetterman vor.

Laut einem Gensler-Bericht gehören zu den wünschenswertesten Strukturmerkmalen:

• Säulenabstand, idealerweise 11 Fuß voneinander entfernt
• Tragfähigkeit vom Boden bis zum Dach zur Unterstützung von 125 bis 150 Pfund pro Quadratfuß
• Bodenvibrationsstabilität für den Einsatz empfindlicher Mikroskopiegeräte
• Große Bodendurchdringungen, die eine leistungsstarke HVAC-Infrastruktur unterbringen können, um den Abluft- und Frischluftlüftungsanforderungen von Forschungs- und Entwicklungslabors gerecht zu werden
• Raumhöhe vom Boden bis zur Decke von 14 bis 16 Fuß zur Unterbringung spezieller Forschungsgeräte

Bertsch von Project Management Advisors behauptet, dass Bürovermieter ihre Gebäude auf Life-Science-Nutzung umstellen wollen, weil diese resistent gegen zukünftige Epidemien oder Pandemien sei. Leider sind sich Vermieter oft nicht darüber im Klaren, wie hoch die Kosten für die Modernisierung der Gebäudetechnik, der Elektro- und Sanitärinfrastruktur sind, um den Code- und Funktionalitätsanforderungen gerecht zu werden.

• Zu den Modernisierungen der Infrastruktur von Bürogebäuden gehören: Hocheffiziente HVAC- und Lüftungs- und Abgassysteme zur Gewährleistung der Umweltsicherheit; Sauberkeit und 100 Prozent frische Luft
• Elektrischer Service, der die doppelte Leistung eines typischen Bürogebäudes liefert, 4.000 Watt gegenüber 2.000 Watt in Bürogebäuden
• Ein Standby-Stromgenerator und alternatives Energiespeichersystem, das rund um die Uhr unterbrechungsfreien Strom liefern kann, um kritische Infrastruktursysteme, Forschung und temperaturempfindliche Produkte zu schützen

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“Will this work for residential?” is the question Grosvenor Properties is asking about the office-to-apartment conversions in its San Francisco portfolio, according to Senior Investment Manager Nathan Lundell.

“This work is just beginning, which means you won’t see the impact of the changes for five to 10 years,” he added.

Office remodeling has become a hot topic across the country, but especially in San Francisco, where a third of offices are vacant and worker office attendance is less than half of pre-pandemic levels. But actual conversions, spurred by high vacancy rates and recent moves toward lower zoning codes and fees, will likely be years away, analysts say, requiring a concerted effort by government and developers to get the projects on track.

“What I like is that everyone is doing the right job,” Lundell said. “The owners do the analysis and ask the questions. The city government actually has the right idea and tries to think: ‘How do we get out of the way? How can we allow this organic change to begin in the first place?’ That is promising.”

According to several recent studies, the city has a higher number of convertible commercial buildings than other markets due to its abundance of older, smaller office buildings. There are nearly 800 office buildings in San Francisco that could be good candidates for repurposing, according to a new study by brokerage firm Avison Young. This ranks the city fifth highest among 14 major cities in the United States and Canada.

The two most important factors in the analysis are the age of the building, with buildings built before 1990 being the better candidates, and the size of the floor slabs. Under 15,000 square feet is best because there is a smaller span between the core and the windows, they said Sheila Botting, president of professional services North America at Avison Young, “if you don’t want to live in a bowling alley with the window rolled down at one end.”

A report by public nonprofit SPUR, architectural firm Gensler, and consulting firm HR&A earlier this year found that 40 percent of downtown San Francisco’s buildings would be good candidates for repurposing, compared to 20 percent of all buildings across North America. The analysis was based on a combination of factors including the building’s shape, size and ceiling height, elevator availability, location and proximity to public transport.

The report also noted that city planning code requirements, including those related to open spaces, number of bedrooms in each unit and seismic improvements, make it “unlikely for most developers to undertake a complex remodeling project under these circumstances.” In addition with high construction costs and stagnant rents in today’s market, “a residential conversion would generate less value for the property owner than retaining the office use, even with high office vacancy rates.”

Given all of the current economic, regulatory and practical obstacles, Nick Slonek, Avison Young’s regional managing director, estimates that of San Francisco’s 800 buildings that could be converted to housing, less than 10 percent are viable. Although environmentally conscious developers and the city would like to see the buildings reused, the price of repositioning may be higher than tearing them down and starting over, he said.

“Obviously, despite sustainability wishes and tax credits and things like that, demolishing the building and rebuilding it is very expensive, but in some cases it’s more cost-effective than remodeling,” he said.

The SPUR report puts the construction cost, including labor and materials, of San Francisco remodeling projects at $472,000 to $633,000 per unit, excluding seismic upgrades. Soft costs, which include city charges, range from around 20 to 40 per cent of total project development costs, which is one reason Mayor London Breed has pushed so hard to reduce them.

She supported the recommendations of a city panel reduced need for affordable housing and lower development feesand joined forces with Chief Executive Officer Aaron Peskin Introduce laws designed to facilitate these conversions, including doing away with the open space and bedroom requirements. Those legislative efforts are due to be presented to the board of directors later this year and, if passed, could accelerate the development process by 18 months, according to planning director Rich Hillis.

Breed has also pioneered the idea of ​​converting traditional office buildings into life science labs. This idea seems great in theory The life science market was the only bright spot Analysts expect this to increase in the office market this year but may end up costing prohibitively unless the price of buying an office building falls close to the value of the property itself.

According to Slonek, the move to life sciences is a “real dilemma” as ceiling heights in traditional buildings would need to be raised by several meters and huge investments would have to go into overhauling the ventilation systems.

Additionally, as the building increases in height, the amounts of hazardous materials permitted in a building decrease, according to Gregg Domanico, vice chair of CBRE’s Bay Area life sciences practice. That makes high-rise buildings particularly difficult for the life sciences transition.

But if the price of buying buildings comes down enough and the city offers broad economic incentives to make those conversions viable, Domanico via email believes the demand is there.

A number of life sciences tenants would rather live in “converted products” in the city than new homes on the Peninsula or East Bay because of the “close proximity to the San Francisco workforce and the urban amenities that San Francisco zoning offers.” historically prevented.”

With a push to change this zoning and other incentives from the Mayor and possibly the stateCoupled with a possible further decline in office building values ​​as more loans mature, conversions across the board could be a real game changer, analysts say.

“The sand is moving all around us right now, so it’s really important as we think about the next five years that more buildings could become more viable than we would see today,” he said Botting with Avison Young. “It’s not necessarily an exact science. This is about contemplating the art of the possible. How can we solve some of the big problems facing inner cities across North America? And conversions will be one of the many tools you can use for this solution.”

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A view of downtown San Francisco. Photo: David Paul Morris/Bloomberg via Getty Images

An attempt to convert Office buildings in downtown San Francisco to apartments continued to advance Week, with the introduction of two actions by the Board of Directors aimed at reducing costs and streamlining the process.

Why it matters: Office vacancy rates in San Francisco reached 29.5% in the first quarter of this year. That beats the previous 2003 dot-com bust record of 19.1%, according to commercial real estate services and investment firm CBRE. The loss of commercial tenants is costing the city significant tax revenue.

supporters of Office conversions also say it’s time for a new downtown that’s vibrant 24/7.

• One of the measures introduced on Tuesday would eliminate some fees normally charged for residential development, for things like transit and public art.
• The other would streamline the process by changing a number of current housing planning law requirements, such as: B. Details of exposure to natural light and parking of bicycles.
• “We’re going to step out of the way and see what the market does,” supervisor Aaron Peskin, who co-sponsored the proposal, told Axios.

The Intrigue: You’re unlikely to end up in a corner bedroom with sweeping views. That’s because the enormous footprint of many high-rise office buildings means that if remodeled, the bedrooms may need to be interior and therefore windowless.

• An assessment of downtown buildings indicated that conversions could create more than 11,000 new housing units.
• But architect Mark Hogan of OpenScope Studio — who helped design the code rationalization proposal — says the best candidates for conversions, particularly affordable ones, are the older, shorter downtown buildings.

What you say: “We should start getting those qualities. We should start building, we should find people who want to do some of these to prove it works,” Hogan told Axios.

• “To say that we will focus on 50-story buildings that will require hundreds of millions of dollars feels a little hopeless to me.”

Between the lines: Officials are also examining broad stimuli for downtown development like a property tax freeze and rollback of SF’s property transfer tax, which voters raised in 2020 from a maximum of 3% — depending on sale price — to a maximum of 6%.

• “I think freezing the property tax increase was a significant idea,” Supervisor Ahsha Safaí told Axios. “We can’t fully control that here at the local level without government intervention.”

Zoom in: San Francisco’s proposals focus on downtown and Union Square.

Zoom out: Other US cities are also exploring office-to-apartment conversions.

Flashback: Ten years ago, the former AAA headquarters at 100 Van Ness Ave. converted into 400 apartments. Rentals now start at $3,212 for a studio.

Remarkable: Office futures are not all craters. Cisco just signed a multi-year lease near the Chase Center, and according to The San Francisco Chronicle, Donald Trump’s share of SF’s office space is 95% leased.

What we observe: Proposed state legislation could pave the way for ‘ex of rights’ conversions, skipping reclassification processes. MP Matt Haney – a former SF overseer who supports the bill – says he wants to speed things up.

• “Honestly, I’m worried about whether San Francisco will go far enough or move fast enough,” Haney told Axios.

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