With the shortage of new land, especially in large urban centers, you might ask yourself: why not transform office buildings into residential units, like multifamily operations, for example?
If this is possible, why is it not so common to transform corporate buildings into residential ones?
Converting a corporate building to a residential one can be a complex and costly process and includes many considerations, from building infrastructure to zoning, local market demand and other issues. It's not a quick process – construction can take an average of 8 to 16 months – however initial assessments can be carried out quickly with the help of our consultancy.
Cushman & Wakefield's Project & Development Services (PDS) team has a streamlined process for owners and investors to quickly assess and decide whether a conversion project idea is worth pursuing. We dedicate significant resources to evaluating conversion opportunities and can estimate costs, time, risks and likely returns.
Important features about converting corporate buildings to residential:
• Presence of abundant natural light, operable windows and shallow core depth for exterior windows are important
• Conversions typically take less time and cost than new builds
• Fewer parking spaces are generally needed; Areas can be converted into common areas
• Amenities are key to stand out from other residential projects
• Some municipalities offer tax breaks as part of the conversion economy
Steps of the conversion study
1. Conversion Exploration
Cushman & Wakefield research teams can analyze local markets to see where there is unmet demand for residential and office buildings with high vacancy, then develop a plan to convert office buildings to residential for owners or potential new owners.
Identifying a building to convert can happen in a few ways: Owners of existing buildings may identify buildings that are difficult to lease, lenders and banks may take control of a distressed or stressed asset and wish to explore new uses.
2. Market Analysis
Based on our market intelligence and capital markets research, we determine which locations, markets and submarkets are in high demand for multifamily housing. We explore the types of spaces that are in demand to further examine identified properties and ensure there is sufficient demand to rent them.
3. Validation/Conversion Strategy
Once we identify potential properties for conversion, we determine the opportunity using a low-cost scorecard tool that analyzes site characteristics including walkability, neighborhood, safety and government incentives. We also evaluated the physical characteristics of the building and the technical feasibility of the conversion.
After analyzing these components at a high level, we can advise whether a conversion would be a good investment in a short period of time, at little cost.
4. Due Diligence
In the due diligence phase, it is time to involve the architect, urbanist and engineers. We started to develop conceptual plans for the building:
• How many units will the building yield?
• What is the mix of one-, two-, and three-bedroom units?
• How will the asset be positioned in the market?
• What physical characteristics will require investment? (e.g. window replacement, plumbing and electrical improvements, etc.)
• Is there adequate residential parking?
• Do ceiling heights work?
• Will the mechanical, electrical and plumbing systems work for a home conversion?
• Are there enough elevators and are they well located?
This last step usually takes a few months and usually requires an initial investment to build the conversion team. If involved early on, we can provide homeowners with confidence in whether they should go ahead with the conversion idea or not.
Cushman & Wakefield partners with CRE owners and investors to identify and execute the best uses for their assets. If corporate or commercial assets can be converted into housing, we can help solve the housing shortage, reduce unnecessary vacant spaces, and help improve our cities and local communities.
