The Solution to the Office Crisis: Living Where You (Used To) Work
We’ve heard this one before: The office real estate market is on the verge of collapse as landlords take heavy losses on the default of major office buildings.
- It’s only getting worse… In the first quarter, the US office market vacancy rate hit 17.8% — the highest in 30 years.
- And it may be the new norm. In the second quarter, only 42% of US companies require employees to work full-time in the office — 28% are fully flexible, and 30% are hybrid.
Companies continue to cut back on office space, but there’s a solution to all those empty units…
Living where you (used to) work
Office buildings are already being converted into residential units across major cities. This could solve three problems at once: Filling in empty offices, relieving a housing shortage and revitalizing neighborhoods hurting from the lack of commuters. Sounds like the perfect solution — except it’s not that simple.
- Zoning laws restrict certain buildings from being used for other purposes, and getting permits can take time.
- Installing plumbing, kitchens, bathrooms, and other structural changes is expensive.
- Existing structures and ceiling height requirements are difficult (and expensive) to work around.
In some cases, to satisfy light and air requirements, a giant hole needs to be cut in the middle of the building to create a courtyard. And given the high costs, office conversions are typically aimed toward premium buyers — drawing criticism from affordable housing activists.
A little help from the government
Places like California and Chicago have already changed zoning laws or added tax credits, and Boston could be next to join them. This week, Mayor Michelle Wu proposed a 75% tax break for building owners to convert offices into residential units.
She says conversion involves “tremendous costs… the property value of the commercial building has to have sunk pretty low that they’re getting desperate.”