Converting offices into housing? –Streetblog San Francisco
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People are working from home, which means one in five offices in San Francisco remains empty. The Bay Area is also experiencing a housing crisis. Who has more people, including Governor Gavin Newsomthinking it’s time to convert this disused office space into housing.
“It’s all about cost versus value in the end,” Emerald Fund’s Marc Babsin said at a SPUR conference on Tuesday afternoon about converting office buildings to residential use. But, of course, it’s not as simple as it may seem. Transforming a building can sometimes cost as much as starting from scratch with a residential tower. It only makes sense when the economic factors are aligned – even then the challenges can be immense.
Babsin and the other members of the SPUR panel should know this: they have in fact managed office building conversions. When AAA decided to abandon its offices at 100 Van Ness and move to Walnut Creek, they expected to continue renting the building as offices. But the 2008 recession hit. “In 2011, they hadn’t rented a single office. Which created a conversion opportunity.
Faced with a sluggish economy and intense competition in the mid-market area of Market Street, Emerald was asked to convert. The planning department was happy to approve the work as they wanted the area to be activated in the evening. And the transit confluence also made it a draw, Babsin explained.
But it was anything but easy to convert a brutalist 1970s building with sealed windows into something suitable for residential. For one thing, floor plans meant units had to be long and narrow, with windows on only one side. And the existing windows were already very small. This meant that to bring decent light into the units, the developers had to completely rip the skin off the building. “We had to remove 1,200 concrete panels,” he explained. Also, as the building took up the entire property, there was no room to base a crane. So they improvised and attached the crane to the side of the building itself. “What keeps a developer awake at night is the idea of us dropping a concrete panel on a car or a pedestrian.”
Fortunately, no sign was dropped. But questions remained: Would tenants and condo buyers accept the unusual floor plan with so little natural light? “We ended up putting the bedroom in the middle.”
Ultimately, he said they found residents who liked the layout. Arden Hearing of Lendlease had similar concerns and challenges with the office conversion to Pacific condominium in Webster and Sacramento. The 1960s building was also brutalist, with a “street-level concrete wall. A challenging building in a great location. But it was as if it had been built like a fortress. His company had to rip out that wall and chisel out the concrete in many other places to check joints and perform seismic updates. “There were columns that weren’t plumb, floors that weren’t level. It was a painful process.
The smaller building had a larger, more open floor plan. So his company solved the light problem by deciding to build much larger units, which could fill in corners and bring light in multiple directions. “We built 66 condos and 10 townhouses on surface parking, averaging 2,000 square feet.”
As for the costs, he said it was a wash between converting and demolishing the building and starting from scratch. But that doesn’t mean there aren’t significant advantages to converting over starting over. “We grandfathered the size,” he explained.
This simple fact alone, the panelists explained, puts a proverbial chip on the conversion scale compared to new construction. Local neighbors cannot object to the height, because the building is already there. And typically, activating space on the ground floor and adding residents rather than offices results in less traffic impact.
But every office building is different. In a unique case, a building in downtown Honolulu underwent a partial residential conversion, with existing office tenants remaining in their offices while the work was done. “Mixing office tenants and residents is a challenge,” said SCB’s Strachan Forgan, who did the work. Additionally, “we weren’t sure how office tenants would react to going to a meeting and having someone in the sweaty elevator going to the gym. But it was fine.
Forgan also worked on the conversion of the old Tribune building in Chicago into luxury condominiums. Given the large spaces and vaulted ceilings of the 1920s building, it was also “easier to convert with large luxury units, which can utilize the deep space in the middle of the plans”, he said, resulting in “Almost 4,000 square foot units.”
The takeaways from the roundtable were, yes, conversions often make sense, if the economic data is good. And each building requires a different approach depending on the structure and the year of its construction. That said, if there isn’t enough ceiling height to add new ductwork for individual units, it probably won’t work for residences. “If you can jump and touch the ceilings, run away. Bulldoze the building,” Hearing said. And all the panelists stressed: be prepared for unforeseen costs. “We had asbestos in the carpets,” Babsin said. “So that meant hiring guys in white jumpsuits to take it all off. It’s not cheap.
But they were all optimistic that the post-pandemic world will provide more opportunities for conversions. “We see a deep demarcation between the next generation and the last generation of workers when it comes to office space,” Hearing said. “Those pink granite office buildings that were popular in the 1980s are no longer places people want to work. If you are an owner-investor in one of these buildings, you are talking to us now.
Yes, conversions are complicated. However, “even if 60% of the buildings are unsuitable, that means 40% are,” Hearing said. “Even if it was only 10%, it would be an incredible housing supply.”
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