NEW YORK, April 24 (AP): On the 31st floor of what was once a towering office building in downtown Manhattan, construction workers lay down steel bracing for what will soon anchor a host of residential amenities: a catering station, lounge, fire pit and gas grills.
The building, empty since 2021, is being converted to 588 market-rate rental apartments that will house about 1,000 people.
"We’re taking a vacant building and pouring life not only into this building, but this entire neighborhood,” said Joey Chilelli, managing director of real estate firm Vanbarton Group, which is doing the conversion.
Across the country, office-to-housing conversions are being pursued as a potential lifeline for struggling downtown business districts that emptied out during the pandemic and may never fully recover.
The conversion push is marked by an emphasis on affordability. Multiple cities are offering serious tax breaks for developers to incentivize office-to-housing conversions - provided that a certain percentage of apartments are offered at affordable below-market prices.
In January, Pittsburgh announced it was accepting proposals to produce more affordable housing through the "conversion of fallow and underutilized office space.”
Boston released a plan in October aimed at revitalizing downtown that included a push for more housing, some of which would come from office conversions. And Seattle launched a competition in April for downtown building owners and design firms to come up with conversion ideas.
In the nation's capital, Mayor Muriel Bowser has made office-to-housing conversions a cornerstone of her plan to repopulate and revitalize downtown. Her "comeback plan” for the capital city, announced earlier this year, seeks to add 15,000 new downtown residents, in addition to the 25,000 who already live here.
"Our job is to make sure that we are getting more people downtown,” she said at the time.
But the conversion push has some skeptics. Housing advocates worry that the affordable housing requirements could get watered down. And even advocates of the model say giving tax breaks to wealthy developers isn’t the best tool to achieve the goal.
"Developers who feel it’s going to benefit their bottom line will do it without an incentive,” said Erica Williams, director of the D.C. Fiscal Policy Institute. "This is a very costly proposal for an unproven program.”
And, as increasing numbers of employers turn to hybrid work models, there's the question of persuading people to live downtown if they're not required to be there every day.
"You have to make downtown a neighborhood - somewhere that’s living and playful and active,” Pittsburgh Mayor Ed Gainey told an panel at the United States Conference of Mayors meeting last January.
Jordan Woods, a 33-year-old federal government contractor, moved to a downtown Washington apartment in 2019, attracted in part by the appeal of walking to work. But then came the pandemic. Downtown, he said, was "like a moonscape” for more than a year.
"And even before the pandemic it was still missing basic stuff like playgrounds and dog parks and a normal non-Whole Foods grocery store that I could walk to,” Woods said. "I wouldn’t say I regret it, but if I was considering the same move right now, I’m not sure I would do it.”
Chuck D’Aprix, principal at Downtown Economics, a development consulting firm, said businesses and services like mid-size affordable grocery stores and day-care centers, pet supply shops, hardware stores and auto repair garages are needed to attract people to make the move. And they need to stay open past regular office hours.
"A lot of those services simply aren’t available right now in small city downtowns or mid-sized city downtowns, you know, they close up at night,” D’Aprix said.
But with vacancy rates at downtown office buildings continuing to rise, from 12.2% in the fourth quarter of 2019 to 17.8% in the first quarter of 2023, according to the real estate firm CBRE, there's an urgency to do something.
In New York City, where the vacancy rate is 15.5%, Mayor Eric Adams announced in January a plan to bring 500,000 new homes to the city including what he calls rent-restricted units.
A key piece of that plan is to rezone parts of Midtown Manhattan which currently only allow office and manufacturing spaces. The mayor's office also is pressing for approval of tax breaks that would entice developers to invest in conversions that include affordable units and other changes. Deputy Mayor Maria Torres-Springer said the conversions could help "make a dent in this dire housing crisis that we’ve been in.”
Conversions are credited with turning lower Manhattan from a neighborhood that shut down at dusk into a sought-after destination for both families and foodies.
"All of a sudden, you just saw strollers and dogs, so obviously that means that people are not just coming to work. They’re actually coming to stay," said Ross Moskowitz, a partner at the Stroock & Stroock & Lavan law firm who specializes in real estate, land use and public-private partnerships.
But there are challenges.
"Converting buildings is not easy,” said Luke Bronin, the mayor of Hartford, Connecticut. "There are a lot of buildings that just aren’t conducive.”
Issues include access to natural light and air, the absence of balconies and the need to install hundreds of bathrooms and kitchens, along with the accompanying plumbing, in buildings often constructed with just two large bathrooms per floor.
There also can be environmental issues, like asbestos, said Anoop Davé, the CEO of Victrix, a real estate investment management development company specializing in converting mostly vacant office buildings into residential buildings and hotels.
Christopher Nicholson, 38, a technical operations analyst, knows first-hand the pluses and minuses of living in a converted downtown office building.
In 2018 he moved into a 31-story former office high-rise in downtown Denver that was built in 1967 and converted into apartments in 2006. "There was definitely a lack of green space, the nearest park is more than a half a mile away," he said. "The grocery store was about a mile plus.”
He moved to his current building in 2020, a 130-year-old, nine-story former office building converted in 2000. It's right by the light rail and bus stops and near hotels that have nice restaurants and cocktail bars.
"I can’t imagine living anywhere else,” Nicholson said. "I think for what I get, I’m more than happy with the tradeoffs that I’ve made." - AP
