With more than 16 million Americans today residing within two miles (3.2 km) of their city hall, the recent revival of downtown living may be most obvious in the form of newly built luxury residential high rises appearing in so many cities. A less-noticed dimension of the downtown housing story over the past several years has been an increasing number of conversions of older office buildings into apartments and condominiums that serve a wider swath of the housing market. The underlying fundamentals suggest that this trend has more room to run, although—as with so much in real estate—the specific local context and the availability of public incentives will define the development opportunities.

Office-to-residential conversions are not new. In the mid-1990s, New York City made a concerted and highly successful effort to revitalize lower Manhattan through the approach at a time when 25 percent of the area’s 100 million square feet (9.3 million sq m) of space was vacant. (Around the same time, a developer named Donald Trump touted his remake of the Gulf+Western Building on Columbus Circle into Trump International Hotel and Tower as the first conversion of a modern high-rise office building to residential use.)

he 1996 conversions of the Chicago Motor Club and the Singer Building into condominiums—the first nonrental housing developed inside Chicago’s Loop in a century—spurred nearly 30 similar redevelopments during the two-decade administration of Mayor Richard M. Daley. Over the past 25 years, Philadelphia has seen some 7 million square feet (650,000 sq m) of office space—more than 10 percent of the city’s inventory—transformed into housing and hotels, according to JLL. A similar scenario has played out over the same period in Boston and San Francisco.

More recent, and still unfolding, is the spread of this quintessential type of urban adaptive use to a wider group of cities away from the coasts and for a broader range of residential end users. A 2015 report by CoStar, a Washington, D.C.–based commercial real estate market intelligence firm, found that almost half the top office central business district markets in the United States were experiencing significant office-to-residential conversions, with the potential to create roughly 11,500 new residential units in those cities. While activity remains strong in the larger markets, CoStar noted significant upticks in cities such as Cleveland, Dallas, Milwaukee, Kansas City, and St. Louis. Local analysts have also noted record levels of activity in Baltimore; Cincinnati; Richmond, Virginia; Rochester, New York; and Minneapolis/St. Paul, among others.

Three recently completed U.S. projects reflect the variety of product types coming on line in these newer converts to conversions.

Market-rate rental and mixed-use projects: Mercantile Place is a rental apartment community targeted to upscale younger workers and empty nesters in downtown Dallas that consists of four buildings with a total of 704 apartments. Two of the apartment properties are converted office buildings, one of which was historic. The project also includes four restaurants at street level. Forest City Texas used tax increment financing from the city of Dallas to develop the project as part of a broader effort to renovate older buildings and bring more housing to downtown. Rents range from just under $1,000 to nearly $4,000 per month for units measuring 1,000 to 1,200 square feet (93 to 112 sq m).

High-end condos: The Oronoco is a 60-unit, LEED-certified luxury condo building on the waterfront in Old Town Alexandria, Virginia, across the Potomac River from Washington, D.C. The building formerly held offices for the Sheet Metal Workers International Association. The single-level units range in size from 1,549 square feet (144 sq m) to just over 3,511 square feet (326 sq m) and currently sell for $1.5 million to $4 million. All units offer exterior balconies or terraces, with some being over 1,000 square feet (93 sq m). The developer, EYA, left much of the U-shaped base structure in place and built only about half as many units as it could have by right, in an effort to target the high end of the market with larger units. The U-shaped base structure also provided an opportunity to create a central courtyard in the building while creating river views from nonriverfront units. Although part of the existing garage was sacrificed for a gym, a yoga room, a dog-washing station, community rooms, and private storage spaces, every unit still has at least two reserved parking spaces.

-----------------------------------------------------------------------------------------------

Denver, Colorado

http://www.phillfosterco.com/