About 11% of U.S. office buildings could be suitable for green office-to-residential conversions

A National Bureau of Economic Research working paper from researchers at New York University and Columbia Business School indicates that about 11% of U.S. office buildings may be suitable for conversion to green multifamily properties.

According to a report at Globe St., the researchers created “a set of criteria to identify commercial office properties that are physically suitable for conversion.” The paper also discusses “several policy levers available to federal, state, and local governments that could accelerate the conversion.”

The researchers identified candidates for conversion according to the following criteria:

Locations in a city with the strongest negative valuation pressures and with strong transportation options
Buildings constructed before 1990 that tend to be cheaper, have smaller floor plates, and are more charming, increasing conversion appeal
Class A, B, and C buildings that are underused
Buildings at least 25,000 sf in size to ensure enough economies of scale
Buildings with a distance from windows to core of more than 60 feet were excluded
Eliminated buildings with no or few long-term leases left

The researchers showed an example pro-forma for a 212,500 sf office building that would result in post-conversion rent of $8 per square foot as compared to a $3.50 post-pandemic rent if the property remained as an office building.

The proportion of the U.S. workforce working remotely has dropped considerably since the start of the Covid 19 pandemic, but office vacancy rates continue to rise. Fewer than 26% of households have someone who worked remotely at least one day a week, down sharply from 39% in early 2021, according to the latest Census Bureau Household Pulse Surveys.

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