The commercial property market hasn’t been the same since the start of the COVID pandemic. Everything in commercial property has been down over the last several years. Office space has been hit especially hard, as companies have decided to either move to cheaper space or keep their employees working from home. That has left plenty of cities and towns with an abundance of empty office space and no tenants to fill it.
So here’s a question: could all that empty office space become affordable housing? For the record, my question is motivated by a combination of two things. First is what I am witnessing in my own town. Second is a recent Forbes post.
Hotels Becoming Apartments
I live in a town that relies almost exclusively on tourism for economic support. Over the last 30 years or so, the area has undergone a hotel building boom. Needless to say the market is saturated. With newer hotels being more desirable among tourists, the older hotels are struggling the fill rooms. Within just a few miles of my home, nearly a dozen hotels have closed.
The good news is that the properties are not languishing. Instead, developers have purchased them and begun converting them into studio and one-bedroom apartments. Their success thus far has hinged on the fact that people are moving to my state in record numbers. All of these new residents need places to live.
My own curiosity led me to check out some of these new apartment properties online. I discovered very nice apartments with built-in amenities left behind by the previous hotel owners. Best of all, the rents are pretty affordable. Very few people living and working here would find them too expensive.
Repurposing Office Space
I see firsthand what willing developers can do with unused hotel space. Meanwhile, Forbes contributor Deborah Lovich sees similar potential for unused office space. She recently wrote a piece detailing her thoughts on how unused properties could be repurposed in much the same way decommissioned military bases have been repurposed for decades. She makes a good point.
How many hundreds of thousands of square feet in unused office space now languishes in America’s cities? If there is no hope of business returning to those cities, property owners do not have many choices. It seems the only thing to do, short of razing the buildings and starting over, is to repurpose what is already in place. Residential would be the way to go for any repurposing efforts.
What It Would Take
I’ve seen how repurposing old hotels by turning them into residential apartments can change the local landscape. The same could be done with vacant office space. What would it take? According to Actium Partners in Salt Lake City, UT, you need three things:
- Developers willing to focus on affordable housing
- Government officials willing to get out of the way
- Private lenders willing to finance to work.
The least difficult of these things is to arrange is financing. Hard money lenders will go wherever good returns take them. The more challenging aspect is finding willing developers and government leaders. Developers tend to gravitate toward luxury projects through which they can maximize profits. Governments tend to regulate the hell out of affordable housing projects so they can tell their constituents how much they care.
What is happening in my local area with the old hotels proves the repurposing idea can work. We have lenders willing to lend. We have developers willing to develop. And we have government officials content to sit down, shut up, and let it be. It is a beautiful thing.
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