Why Office to Residential Conversions Will Not Save America’s Dying Downtowns
First off, let me state emphatically that adaptive reuse — i.e. converting existing buildings made for one purpose into another — is perhaps my favorite genre of architecture for many reasons:
- Adaptive reuse is usually more ecological than new construction. During an average building’s lifecycle, a quarter of its carbon footprint is embodied in the materials used for construction. Extending the life of existing buildings through adaptive reuse also extends the life of its materials, lowering embodied carbon over new buildings with all new materials.
- Adaptive reuse is usually more aesthetic than new construction, since it is often applied to older buildings whose scale and quality tends to be superior to the generic buildings that characterize most contemporary architecture. Pritzker Prize winning architect Lacaton & Vassal’s work is a beautiful demonstration of this.
- Adaptive reuse is usually more interesting than new construction, since it takes a creative lens to overlay new uses on old structures.
For these reasons and more, I should be excited about the adaptive reuse programs being initiated in New York City, Chicago, Los Angeles, and elsewhere. These initiatives are focused on converting office buildings into housing, ostensibly to relieve housing shortages and give new life to the dead and dying buildings that are making so many downtowns into real estate cemeteries.
I should be excited about this, but I am not…not fully, at least. Let me explain why.
The Problem with Real Estate Monocultures
The shophouse was a once-common architectural form found across the globe, and especially in southeast Asia. As its name suggests, shophouses combined a shop and house in one structure. A shophouse is an architectural form that acknowledges the relation of housing and workspaces. Historically, vocations required more than a desk and wifi signal to perform; most required dedicated workspaces to perform. And because people historically lacked modern public transit or cars, those workspaces had to be close to (or in a) home.
In the late 19th century, public transit and automobiles started decoupling homes from workspaces. One could live in Brooklyn and get to work in Manhattan on the subway. One could live in Naperville and get to work in downtown Chicago driving a car on freeways, or occasionally reverse commute from downtown to suburb. As transit technology and infrastructure grew, housing and workspaces became so decoupled that many regions imposed single-use zoning that prohibited commercial activity in residential areas and vice versa. The net effect of this distancing of home, work, and amenities is an isolated population that spends an inordinate amount of time getting around in their cars. By 2019, the average round-trip commute in the U.S. was 55 minutes per the Census. And though commute times may have shrunk during the lockdown for the ~27 percent of the workforce that works in hybrid or remote situations, there’s new research suggesting that hybrid work is increasing the number of ‘super commuters’ who spend an average of five hours on their daily commutes. Of course, there are still millions who cannot work remotely and commute to work via public transit or, more often, in their polluting, costly, dangerous, stress-inducing automobiles. Technologically primitive, mobility-deficient, shophouse-dwellers walked downstairs to get to work.
By the end of the twentieth century, the U.S. morphed into a land of bifurcated residential and commercial real estate. Downtown office workers either commuted from nearby apartment buildings or came in from suburbs via cars or commuter rail. Suburban offices and other workspaces were in distinct districts from suburban housing. Workers accepted this circuitous, expensive, inconvenient, stressful, anti-social, and dangerous arrangement until the lockdown. Suddenly, office workers were liberated from their desks, commutes, chatty coworkers, and $30 lunches at TGIFridays. All remote workers needed was a computer, a strong wifi connection, and a somewhat quiet space to work — anywhere in the world, in fact. Many companies jumped on the hybrid and remote bandwagon, eager to be liberated from costly, long-term commercial leases.
But the office liberation had costs, the most obvious being scores of empty, or near empty office buildings. The absence of workers moving to and from work made — and is making — many once-busy downtowns into lifeless real estate graveyards.
It wasn’t just the missing office workers that created funereal downtowns. Office buildings employ property managers and other downstream service workers: restaurant and cafe workers, business attire purveyors, etc. These jobs are either gone or imperiled.
Making matters worse, these ‘zombie’ office buildings have operating costs — mortgage payments, utilities, taxes, etc. — that continue whether they’re occupied or not. Without revenue from lessees, building owners cannot pay for those costs. Many experts rightfully see a mass default event on commercial real estate loans as the thing that finally pushes the world economy into the abyss (NB: many commercial loans are held by foreign entities, hence the global impact).
Turning disused offices into housing won’t address the main thing killing downtowns, which is the flight of jobs the offices were initially built for. Without an active churn of people traveling from home to work to shops — the things that make living in cities appealing — downtowns will remain lifeless and insolvent.
Affordable housing shortages aren’t caused by a lack of housing
Excitement about office to residential conversions is fueled by the notion that what’s making cities unaffordable is a lack of housing supply to meet demand. Increase supply, satisfy demand, and everyone will be happy and housed. As I outlined in a previous piece, this notion is specious at best and completely misses what ‘affordable’ means.
Affordability is when something’s price is attainable relative to available budget. Housing affordability is generally regarded as housing costs that are less than 30 percent of household income. For example, a person making $1 million a year can spend anything less than $300,000 on housing and have housing affordability. Affordability is always a relative figure based on a ratio of income to expenses.
Backing up a minute, it’s important to distinguish the terms ‘affordable housing’ and ‘housing affordability’; the former term has become synonymous with government regulated, subsidized housing, while the latter indicates affordable market conditions. Subsidized housing doesn’t affect housing affordability at scale; it provides a handful of folks an affordable home, as long as they keep their incomes low. Moreover, affordable housing is almost invariably connected to handouts to developers — ones they use to subsidize construction of unaffordable housing.
Adding more housing through office to residential conversions or other means won’t increase incomes, so it won’t lead to housing affordability. There will just be more housing that few will be able to afford. On the plus side, these conversions will likely create a windfall for empty office building owners and the developers managing the conversions.
There’s more than one way to convert an office building
There are ways to bring life back to big cities and their lagging real estate, but first there needs to be a reality check about the past, present, and future of work, technology, and civilization.
Looking towards the past, cities like NYC forged their greatness through what they produced, whether that was trade, manufacturing, design, art, food, or something else. Cities like NYC lost their greatness when they became consumer outposts, reduced to being places for global elites to shop, eat, and take in a derivative Broadway show.
Looking at the present, workers and real estate stakeholders need to realize there’s no going back to the idyllic days of $150,000 a year salaried assistant editor jobs, two martini lunches, and 10 year floor-through office leases at premium prices. Many of the high paying professions that were once the downtown’s economic and cultural lifeblood — finance, law, design, media, etc. — are being replaced by technology, and AI in particular. Adding more housing won’t bring cities back to life because these professions and the revenue the produce — revenue needed to pay rent — are going extinct.
Cities need to be completely re-imagined.
Looking towards the future, the best chance cities have for adapting to new economic, social, and environmental conditions is bringing back the spirit and function of the shophouse. People need places to live and work and these places should be very close to one another — perhaps in the same building. If today’s adaptive reuse programs included converting office buildings to accommodate housing, flex-office space, manufacturing and warehouse spaces, industrial kitchens, agriculture, or whatever crazy idea tenants can dream up, I would be very excited for the future of cities and humanity. This kind or real estate exists. A couple stateside examples include The Arcade Providence, in Rhode Island and is Makerhood in Newark, New Jersey. Both make use of historic structures and combine housing and workspaces — retail, light manufacturing, food production, and agriculture — all in one development.
But alas, most adaptive reuse programs I’ve run across are stuck in the single-use real estate paradigm, usually converting single-use office buildings into single-use residential buildings. This path undermines what makes successful cities successful, namely a distributed and compacted mix of residential, commercial, and recreational spaces, where everything one needs is easily accessed, where movement between these spaces creates a dynamic, active, and social civic life. This path can and should be taken, but it won’t until minds, real estate, and Capital Markets become open to new possibilities.
If you’re sitting on dormant real estate and need help finding new uses for it, I’m around to help. Drop me a line.
