Although Covid-19 has subsided and returned many employees to their cubicles, continued remote work and a housing shortage has spurred more office buildings to be converted to apartment buildings. Nearly 71,000 residences across the country are in the pipeline, more than triple the number three years ago, according to a report from RentCafe.
The report defined projects in the pipeline as those that have been approved, remain under construction or are in the planning phases. Researchers analyzed data from RentCafe’s sister company, Yardi, which surveys commercial properties nationwide, to reach their conclusions.
New York, the country’s largest office market and one of the most-competitive residential rental markets, counts the most conversions, 8,310. High-profile projects include the transformation of the former Pfizer headquarters in Midtown, set to deliver 1,600 apartments.
Washington D.C., came in second with 6,533 conversions, a number that could rise with the Department of Government Efficiency’s quest to cut office leases.
Despite the boom, creating residences out of offices is a challenge, and not all buildings are well-suited. Properties from the early 20th century are best, thanks to narrow floor plans, which make it easier to design bedrooms with windows.
But to encourage conversions, municipalities are providing financial incentives and streamlined processes. New York and Washington offer tax exemptions or abatements and San Francisco has updated building codes and is simplifying the approval process. Washington and New York City provide tax abatements or exemptions, which in New York can be as much as 90 percent for buildings with at least 25 percent affordable apartments, according to the report.
Developers must also overcome high interest rates and the effect that tariffs could have on prices of materials, and the campaign to deport illegal immigrants, which could reduce the work force the construction industry has long relied on.
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