WASHINGTON: Blocks of the White House, a simple building in downtown Washington, is set to be converted into homes for hundreds of people once used by the US Justice Department in offices.
The transformation of vacant office space comes amid a surge of "adaptive reuse" projects that swept the US property market in 2021, where developers bought hotels and offices struggling to get business and needed to convert them into apartments. Plan announced.
"The market spoke up, and it said the value was higher for a conversion than to continue as office space," said Michael Abrams, managing director of property development firm Folger-Pratt, which operates a 14-story building in New York City. Changing building. Ave. at 255 Apartments.
A survey by apartment listing service RentCafe found that nearly 20,100 apartments in the United States were built from converted properties last year, nearly double the number converted in the previous year.
Such conversions could offer a path to American downtowns that haven't been the same since office workers fled as Covid-19 broke out nearly two years ago, leaving landlords and local businesses struggling. fell.
"The slow office market recovery is just going to make it more expensive to move vacant office buildings," Abrams said.
Conversions can also play a role in bridging the affordable housing shortage, especially in cities like Washington, where notoriously high rents are a feature of life.
"From an overall perspective, we only need to increase supply. With more supply, there will be less increase in home prices and lower rents," said Lawrence Yoon, chief economist at the National Association of Realtors.
even more expensive
Despite the slowdown caused by COVID-19, the average price of existing homes climbed 15.8% during 2021, and supply had hit an all-time low by last month, according to NAR data, possibly exacerbated by the affordable housing crisis Was. Epidemic predicted.
As of 2017, 48% of tenants were considered "rent-burdened" by the U.S. Government Accountability Office—meaning they paid more than 30% of their income in rent—a figure that increased six percentage points over the past 16 years. Was.
Meanwhile the United States is full of offices. While many of them, dating from the 1980s, are now too old to be attractive to companies, said Tracy Haden Loh, a partner at Brookings Metro.
"With their design centered around old needs like space for file cabinets," he said in an interview, "the whole building is actually obsolete."
corporate pullout
Mark Ehrlich, chief investment officer at Rose Associates, which has converted New York City offices into housing, said such projects are "well-located properties that require higher and better use."
One of his firm's latest ventures is telecommunications firm AT&T's transformation of a once-use office where people want to live.
Ehrlich said the building is unlikely to attract commercial tenants due to its lack of amenities such as covered parking.
However, the new apartments will feature co-working spaces, as many tenants would like to continue working from home, he said.
In Washington, developers are bouncing on properties previously rented out by the federal government, the area's top employer.
This includes The Ray, an office building used by the State Department but which has been completely renovated to house apartments.
The only signs of its former use are in the lobby, where the tiles are original, as is a directory listing the names of State Department offices once located there.
"The pool of tenants moving back into these buildings has shrunk dramatically, and that's what's putting stress on that level of the property, creating that opportunity," Abrams said.
Adaptive reuse projects demand higher rents, Loh said, because they often require costly renovations, such as the construction of new bathrooms in buildings where they were once communal.
Expanding inventory to relieve price pressures elsewhere in the housing market has been shown, "this is not a solution to the housing crisis," she said.
"It's a solution to revitalize areas like downtown that are heavily dominated by spaces like office spaces."