By Jared Donnamiller, PE, AKF Group
The evident need for more affordable housing and the increase in commercial office building vacancy rates in many major US cities has created a confluence of storms with a potential resolution to benefit families in need of housing and owners of mostly vacant office buildings. The support of lawmakers at all levels and the creative approach from design and construction teams may provide a solution that offers owners and developers an alternative to defaulting on existing loans while creating affordable housing options to benefit city residents.
Converting commercial office spaces to residential has been limited to date. Current financial hardships and zoning requirements associated with the conversions has limited the viability of this approach to many owners. Law makers at the state and local levels are working on solutions to make these options pencil as well as updating zoning requirements to make more large floorplate office buildings work for residential occupancy. Washington, DC is specifically offering a Housing in Downtown (HID) Program that will offer 20-year tax abatements to developers and owners who convert their office buildings to residential and include a minimum of 10% of the units for affordable housing.
The challenge with the adaptive reuse approach is not limited to cost of construction but extends to design challenges for architects and engineers tasked with turning a dated commercial office building into a desirable place for families to call home. AKF’s involvement is specifically focused on mechanical, electrical, and plumbing (MEP) upgrades to the systems and decarbonization of the existing buildings. The original construction date and existing MEP systems in place differ across the viable properties which require a custom design approach. There is a fine balance between reusing and repurposing existing MEP infrastructure vs. integrating new technology or fully replacing with new technology. All these options are being reviewed with a focus on viability, cost, energy usage, and phasing, among other factors.
We have seen a significant uptick in activity in this market in 2024 as more building owners are challenged with increased vacancy rates and lawmakers are putting financial incentives in place to make the conversions viable and provide affordable housing. While class A+ office properties are still seeing strong interest, the less desirable are getting less traction. The less desirable properties are also in more need of attention in terms of lobby upgrades, amenities, decarbonization upgrades, and MEP system upgrades.
Top tier developers and landlords are entering the market with properties that are in desirable locations and contain upwards of one million square feet. This has the potential to offer great mixed-use and dedicated residential properties in central urban locations at rates that account for most family income ranges.
The large-scale success of these conversions through 2024 and into 2025 may be a catalyst for more state and local lawmakers to change the incentives for developers. This ultimately creates more affordable housing units for the families that need them and takes the glut of underutilized office space out of the market. Collaborative solutions between the different cities, states, developers, and design teams can leave a lasting impact that becomes a blueprint for the future.
Jared Donnamiller, PE is a partner at AKF, an MEP/FP Engineering & Integrated Services firm with offices throughout North America.