Post-pandemic cities are returning to a new normal, yet office buildings remain stubbornly below capacity. How can they be repurposed for a new economy?
With the majority of Americans now convinced that the pandemic is behind us (despite an inflated death rate claiming to the contrary), daily life is steadily approaching a new normal. People are returning to restaurants and cinemas, unafraid to inhale the public’s anonymously expelled respiratory droplets. That’s good news for many companies and shareholders, but one sector that’s not seeing nearly as much enthusiasm is office real estate. In the US inner cities, office buildings remain partially occupied and lose both economic and social value.
The emergency measures that have allowed us to work from home during the pandemic have shown that remote working is not only possible for more people than we’d led believe, but they’ve also shown us the satisfaction of skipping the commute to work, taking a walk at lunchtime, throwing in a load of laundry before the Zoom meeting, and spending more time with the people we love. As such, the push for remote work (or at least hybrid work) is an enduring feature of the new normal, at least for those with higher wages or higher education levels.
Despite management’s strong desire to babysit employees, making sure they can keep their fingers on the keyboard and not spend a minute in the toilet, the ability to work remotely has become an extremely important benefit for many job seekers. So much so that companies that offer flexible working hours hire about twice as many employees as companies that don’t. In Q2 2023, 51% of companies offered a variety of remote work, up from 43% in Q1.
Companies without flexible working options have a harder time attracting talent. Maybe it’s the “extra collaboration” in the offices that means people have to take more work home at the end of the day just to get it all done. (Spoilers: this isn’t the kind of “work from home” people are into anymore.)
Remote work might be what employees crave, but won’t that make office buildings think?
In cities with huge business districts like San Francisco and New York, the number of remote workers calling employers is so high that it’s driving down commercial real estate values. Occupancy rates are about half what they were before the pandemic, and while that seems like a savings for companies that can compact their space and sell a significant portion of their holdings (or just move out after leases expire), it doesn’t work in a market where everyone’s doing the same thing.
This leads to downstream problems for those whose livelihoods depend on office building demand. Of course, there are coffee shops, corner shops, and sandwich shops that find themselves in dire straits, but we can also expect more bank foreclosures, lost tax revenue, and desperate landlords (try not to get too sad about it). San Francisco employers employ so many remote workers that the city lost $484 million in tax revenue in 2021. Between work-from-home situations and tech company layoffs in recent years, San Francisco-area office buildings are clogging the market, but since they’re not yet falling to fire sale prices, buyers aren’t exactly lining up.
With about $24.8 billion worth of distressed office real estate in the United States and banks nervous about their loan portfolios, one might think the perfect solution would be to convert what we don’t need — big city offices — into what we really need, like affordable housing. The developers venture into it because it’s an obvious way to make money, but it comes with a lot of problems.
First of all, converting office buildings into apartments is not as easy as one might think.
It’s difficult to convert large, windowless spaces into homes. Photo by Loadmaster (David R. Tribble), courtesy of Wikimedia Commons. CC BY-SA 3.0
Before World War II, office buildings were narrower, shorter, and had more windows. With no air conditioning or as much artificial light, it was the norm to surround workers with windows that let in fresh air and sunlight. These older buildings are much easier to convert into dwellings than newer buildings with larger floor slabs. In the post-war period, advances in technology allowed for more efficient office buildings with more space inside, but who wants to live in the middle of a large floor, in an apartment with no windows? Some architects get around this by cutting a square “light well” right through the middle of a building, allowing some sunlight to enter a tall, narrow cavity around which dwellings can be built. But is that really a desirable multi-million dollar prospect?
“Million dollars” is perhaps not an exaggeration here. Such conversions are not easy and more difficult also means more expensive. Commercial buildings have centralized utilities and structural features that make it difficult to distribute plumbing or appropriate HVAC systems to compartmentalized units. Floors and beams could use reinforcements. Zoning may also prohibit mixed-use precincts or mandate a specific number of windows per unit. To change all this, it takes money to create a product (living space) that is rented out at a lower price per square meter than the original use (office space). Such costly repurposing requires economic incentives, such as tax breaks from governments, which in turn wipe out revenue from gutted business districts. Without subsidies, the new homes will have to be marketed to an upscale clientele used to paying for luxury, meaning it’s unlikely to be affordable housing.
Consider converting this office into (barely) habitable living space. Would you pay a lot of money to live here? If you’re like most, probably not.
So what else can you do with empty office buildings?
There are some tendencies to convert them into vertical farms. The lettuce doesn’t care if their surroundings are soulless, ex-cage farms, but they also don’t visit local restaurants unless it’s on the plate. Vertical farms come with their own set of problems, such as having to shield sun and rain and then plan for replacement with electricity and metered water without turning a profit. Plus, they’re more suited to small gourmet treats like strawberries and off-season herbs than the kind of high-calorie staples that feed the masses. Still, it’s kind of a purpose.
Forbes is more optimistic, hoping budding innovators will hit nowhere with their own reimagined uses for unused office buildings, but the best suggestion they make is converting them into homeless shelters, with centralized kitchens and presumably without the need to create individual spaces for individual people.
Other suggestions include storage units, classrooms, food distribution centers, workspace rentals for individuals or small businesses, micro-gyms that can be rented by the hour, private venues, art or photography studios, and pop-up retail (think those seasonal, short-term Halloween stores). Whether people would regularly commute to use such places, or whether there would be enough demand to soak up the country’s vacant office stock remains to be seen. It would also be easier to repurpose such spaces if the new uses didn’t also have to generate revenue to justify their existence.
As societies change and economies inevitably change, figuring out how to repurpose or dispose of obsolete infrastructure is a constant reality. The challenge may seem daunting, but it’s nowhere near as daunting as what we must do when cities themselves become uninhabitable. Perhaps, like our medieval ancestors, our descendants will scour our abandoned sites for useful materials, a kind of futuristic spoil with which to build their settlements. Vacant office buildings will then no longer be on our problem list.
Related: Thinking about life after the pandemic
Sources:
America’s COVID-free summer mentality
The pandemic is really over, not seriously, we mean business this time
Looks like someone moved the pandemic goalpost
Family relationships at work from home: Exploring the role of adaptive processes
Who has the opportunity to work from home? There is great income inequality
The latest on hybrid work: who is WFH and who isn’t
Is there such a thing as too much collaboration? Attempting to get workers back into the office could involve major risks
Surprise, surprise: companies that offer remote work are growing faster than those that don’t
Businesses that require full-time in the office struggle to recruit new employees
Commercial real estate may not recover until 2040, with cities with low occupancy and high costs like New York and San Francisco being hit the hardest
City report says remote work will cost SF$484 million in tax revenue in 2021
Not interested in the large tech buildings in San Francisco for sale
Distressed US offices rise to $24.8 billion, more than malls
Can Manhattan Adapt If Remote Work Becomes Permanent?
Office real estate values are falling so fast that banking giants like Wells Fargo are already facing losses
What it takes to convert a multi-million dollar office into living space
Why the dream of turning empty offices into living space is a failure
‘Soul Wrecking’: Bay Area office conversion failure goes viral
Empty office buildings are converted into vertical farms
Vertical indoor farms are filling empty office space as the industry grows
Don’t worry about empty office space – repurpose it
What to do with all the empty offices? Startups see room for everything from ‘learning pods’ to ‘microgyms’
6 ways to transform your empty office space profitably
Alarm as fastest growing US cities risk becoming uninhabitable due to climate crisis
Spolia – recycling the past
Can a city be sustainable?
