What No One Tells Landlords About NYC Office-to-Residential Conversions – Commercial Observer

The feasibility of office-to-residential conversions was already the biggest conversation in the new development space in New York City in the first half of 2023. With Class B and C offices struggling, occupancy waning, and many offices sitting empty, compared to low residential inventory and a need for affordable housing, exploring conversions had already been paramount to landlords, investment sales brokers, and analysts.

Then, at the end of October, the Biden administration announced an initiative to incentivize the conversion of empty office buildings into housing and help build new affordable housing units. Days later, WeWork made news with its highly anticipated bankruptcy filing, and with it news that it is exiting 40 locations in New York City alone.

In response to the pandemic and shifting needs from developers and investors, we launched a research and advisory division in 2020 that works in tandem with our core business of the sales, leasing and marketing of new development condominium and rental buildings. Now, the majority of that business is analyzing office-to-residential opportunities in Manhattan and the boroughs. 

For all the headlines on conversions, and a few projects that have gotten off the ground, there is much more opportunity than is being talked about in the market. Yet, what makes for a great office building can make converting to residential challenging, expensive and time-consuming.

Algorithms, apps, and AI are all tools that architects and investment sales brokers tout in assessing feasibility, but there’s no substitute for walking the building and putting pen to paper — working through ideal residential unit mix and sizing within a building footprint through iterative blocking and unit plan sketches. As experts in residential pre-development planning, our detailed process guides and informs owners and their lenders on what to underwrite.

Landlords must consider various elements that may not show on digital tools when they evaluate these conversions, including windows, courtyards, ceiling heights and outdoor space. Studying the existing elevator core, egress stair locations, column placement, and depth of floor plates are critical in differentiating buildings in the market.

Projects with more exterior wall and windows per floor plate dimensions are more attractive, and why corner properties are generally better candidates for conversions. Placement and sizing is also important. While large windows are beautiful, they can make residential layouts challenging. They are often accompanied by large expanses of solid masonry that result in a prominent façade, but floor plates that are more challenging for residential interiors.

Many late 19th century and early 20th century office buildings implemented unique fenestration that, while stunning, can create unconventional residential spaces. Squat, attic-style windows help create an iconic cornice, but not an ideal living room vista. Residential plans would need to creatively account for that, perhaps by duplexing floors to create office or bedroom spaces in rooms with unusual windows.

Other older office buildings were built with smaller, often narrow, corner windows, which is antithetical to how new residential construction is built, where living and dining rooms occupy the corners and feature large windows to showcase multiple view corridors.

Another important element is maximizing courtyard and alley spaces with legal light and air. Part of the conversion analysis should look at these sometimes underutilized, light-challenged spaces, and consider positioning larger units at the perimeter so living areas benefit from good views and bedrooms face the courtyard. This tends to work well because, while we need light and air in bedrooms, buyers are less focused on the views in these spaces, and quiet is appealing.

Laying out residential apartments can potentially require moving the elevator core to design the ideal unit mix to achieve premium pricing for the building in its submarket. The process of moving the core can be very costly and ultimately cause the project to not be financially viable, so it is an essential first-phase consideration so landlords do not waste their time and resources planning a building that ultimately will require this costly endeavor.

Column locations add to the complexity of conversion studies, as column sizing and spacing in office buildings are very different from what we plan in ground-up residential. We study how to work with existing placement to attain the most desirable unit mix in each location/submarket. Because unit mix and sizes differ between condo and rental, we often sketch both options to see how they work with column placement.

Deep office floor plates can be another challenge, creating potentially unusable or less valuable space with long corridors and areas with no natural light or ventilation. However, if smartly designed, they can also yield larger units with generously sized kitchens, home office areas, bathrooms, utility spaces and closets. Ceiling heights are often a bonus, far higher than in ground-up residential.

Many conversions have details people covet in new construction but are designed only at the highest price point, if at all. Detailed windows with intricate jambs, headers and sills, traditional architecture, and historic motifs are common in older office buildings but not typically budgeted for in new construction. Many have storied histories woven into the fabric of the architecture and are felt when one experiences them.

They present natural opportunities for architects and designers to develop designs that are responsive to the historical context, while simultaneously adhering to adaptive reuse initiatives that save resources, energy and demolition waste. With the right foresight and planning, and, hopefully, new tax incentives to make these projects more economically viable, these conversions have immense benefits to our city and our neighbors.

Daniel Seigle is chief architecture and design officer at Brown Harris Stevens Development Marketing. Robin Schneiderman is managing director at Brown Harris Stevens Development Marketing.