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California Converting Empty Office Buildings into Housing?
As some of you know, I am a California political refugee now living in East Tennessee. But I continue to click on a local news website I used to follow to be apprised of what was going on in my area of California. Checking in the other day, I came across a plan to convert empty office buildings into housing. Empty buildings are plentiful, housing not so much.
Assembly Bill 1532 would categorize office conversion projects as “by right” developments, relaxing the permitting and review process for housing projects by preventing a city or county from requiring certain permits to convert a vacant office into housing.
The bill is partially spurred by the hundreds of empty offices in downtown San Francisco, which has seen one of the slowest pandemic recoveries in the country among major metro areas.
According to the commercial real estate firm CBRE, some 27 percent of San Francisco’s offices were vacant at the end of 2022.
My immediate reaction is that this is a good idea. Entry-level housing has been highly problematic for decades in California. Unchecked migration hasn’t helped that any.
But I wonder if this isn’t too late? One phenomenon that Californians are all too familiar with is how a fire can become so big it creates its own weather conditions to stoke the fire and push it forward. Decades of responding to increasing housing prices through raises in wages without increasing inventory has raised prices for everything not manufactured in China. Each wage rise fueled price rises, each price rise fuels wage rises. With Covid reducing building material inventory for over a year, construction material prices went up substantially — if you could get it.
There may now be a structural problem in actually building affordable housing when you factor in material and labor costs in California. All those existing empty office buildings may be there, but converting them to housing actually incurs the most expensive part of home building — bathrooms, kitchens, and plumbing for the same. And for any of you who have done home remodeling you know that it rarely pays off if you use substandard material, and can be a nightmare, as well.
The real answer — at this point — is manufactured housing from a low-cost source, but that is not what Californians want. And truth be told, it is not what should be placed in some of the loveliest real estate around. The Mojave Desert? OK, but that’s not where the jobs are and the commute into LA or San Diego is a killer. The Central Valley? OK, but cutting back on arable land is a terrible idea, and don’t let them into the Sierra foothills. Again, the commute into San Fran or Sacramento is a killer.
But you don’t need to commute, you say. Let them work from home. That’s great, except that if you can work from home, you don’t need to live in California. You are not the one creating the housing demand. It is the people who can’t work from home who need housing in California.
That’s why I am not sure if it isn’t already too late. Too late, at least, for California to simply rebalance and get back to its 1950-2000 iconic status for freedom and opportunity. California is evolving and I am not sure into what it is evolving. In the near term, the control of the California Communist Party is absolute and getting stronger. Its policies will fail and things will move in a different direction with an unknown destination.
Of course, parts of California could turn into this:
I hear those people vote for a socialist government, as well.Published in General
It’s a nationwide phenomenon. Much “class B” and below office space is unrentable, so it makes sense to do conversions.
I work in a large office building that has been about 80% converted to residential.
As noted, they have to completely re-plumb and rewire. Assume a 6500 sq. ft. office is converted to six 1k sq. ft. apartments. Formerly, the only high-power circuits were for 2 copiers, one computer rack, and 2 air handlers/heat pumps. After conversion, each unit has a high power circuit for air handler/heat pump, laundry, and oven/range.
One big problem is that the heating/cooling plant is not up to the task. Commercial properties have their plants optimized for daytime and have a small margin. Nobody cares if the temperature drops to 65F at night in the winter. and there is very little hot water use.
So if they reconfigure the existing plant to provide more hot water and a heating margin for cold nights, they lose any margin for cooling during the day.
There is discussion of turning vacant office space in Chicago’s loop into housing, with 30 percent “affordable” housing. (One of the buildings in foreclosure in this article used to house my husband’s company. He has moved twice since then, downsizing the space.) The loop continues to have very high vacancy rates as people just don’t come into the office anymore.
Yes, some of them are my neighbors here in Tennessee.
It’s California. I suspect that however they try to get it done, it will not go well.
Maybe they can repurpose some materials from the incomplete bullet train to nowhere out in the Central Valley.
Nicole Galinas wrote a column in the NY Post yesterday about the same proposal in NYC and why it isn’t a good idea. https://nypost.com/2023/02/27/theres-no-easy-fix-to-midtowns-post-covid-half-empty-offices/
This is a problem we’re likely all going to be facing over the next decade.
The shopping mall is almost non-existant today. Malls near me only utilize about half of their real estate. The property managers can’t operate on a loss, so something will have to give.
As far as what that actually looks like is anyone’s guess. There’s only so many gyms and children’s bouncy house places you can build.
When I was in Tennessee, I went to an indoor gun range that was converted from a movie theater. Thought that was pretty cool.
And I bet the acoustics were FANTASTIC! :0
Our neighbor has told us about an entire mall that has been converted to an arcade/activity/games venue. It seems to have something for everyone. It was pretty quiet when she was last there, so it’s unclear whether they will be successful.
When I read about that I pictured some post-apocalyptic scenario of squatters with makeshift sterno cookpots in removed file cabinet drawers, and bedrolls under conference room tables.
Allowing property usage to conform to market demands is entirely rational. But killing commercial property values then expanding hell-hole government-owned/controlled housing on the victimized properties is not.
As a preliminary measure on the way to full collapse, I expect that developers will be allowed to offer high-end units as condos or rentals but only if the first two floors are reserved for junkies, psychotics, and other impoverished randos. This will unexpectantly greatly reduce demand for the market-based units and thus such projects will wind up being declared yet another failure of capitalism and the free market such that the city will need to step in and make the entire building open to junkies, psychotics, and other impoverished randos who will unexpectedly trash the place and unexpectedly bring down the entire surrounding neighborhood making more commercial property available for conversion.
I agree – this ought to be a great idea. Individuals have found ways to rehab all sorts of buildings. They do it with imagination, keeping neighborly feeling and economically. Once you get the embedded higher governmental costs and pre-existing construction obstacles baked it, all the ought to be great seems to evaporate. Don’t underestimate CA’s ability to foul things up.
Also, pretty much any loosening of the zoning and permitting apparatus that city governments use to strangle real estate developments tends to be a good thing. Just as long as the state doesn’t start subsidizing these conversions, or mandating how they must be designed.
Horrifying. But likely true.
If you’re in the Nashville area, check out the Royal Range. I got to shoot a Tommy Gun!
And if crime is a perception problem, maybe have a lottery where victims are selected randomly and give up wallets and jewelry without violence. In exchange for granting lottery spoils to registered criminals, the city’s many robocops would be authorized to spontaneously execute violators. That would be completely nuts but I dare you to tell me it is worse than what is likely to be the condition of San Francisco in a few years.
You know what could cut down a lot on high-power circuits needed for residential?
Using natural gas.
Like that ONE high-tech public bathroom in San Francisco?
I’ve thought for decades that a large part of the light-industry aerospace and electronics district southeast of the Los Angeles airport was a ripe target for residential conversion. The buildings are pretty nice looking, built during the defense booms and busts, 1940-1990, with many of them designed in a “mid-century modern” style. But the peace dividend of the early Nineties left the place a near-ghost town (one reason why SpaceX was able to buy so much land in the area). The light rail train has two stations here because the line was planned at the height of the Reagan boom, and it has good freight rail connections as well as easy access to freeways.
But I don’t think it’ll happen piecemeal. And as pointed out in the very first comment, just because a building’s walls and roof are solid doesn’t mean a residential conversion is going to be easy.
One of the multinational firms California hired to build the high-speed train to nowhere got so fed up with California’s corruption and incompetence that they went and built a high-speed train in Africa instead. *That* train is up and running.
The idea that a property owner would have a “right” to convert would at least allow the market to work. One of the impediments to residential development in some parts of California is zoning rules that block (or make very difficult) high density residential projects. So this proposal to prevent cities from blocking conversions would remove that impediment.
Then the market can figure out whether such conversions make sense, and at what price. As is noted in various places, converting an office building into residential is not easy. All the electrical, plumbing, and HVAC systems probably need to be redone. Too much of the floor space in most office buildings is too far away from windows and natural light for conventional apartment layouts, so apartment layouts become tricky. Windows don’t open, and there are no balconies, which may be unattractive to residential tenants. So conversions from office to residential are not cheap. But, by removing the uncertainty of city approval and whatever burdens the city might try to place on a conversion, at least those costs are controlled.
Some conversions have been done. I watched a couple of them when I worked in Rochester, NY. And since I left, the building in which I worked has been converted to mostly residential. A condo building here in Fort Worth was an office building before it was heavily damaged by a tornado about 25 years ago.
Last time I was in New York I noticed that a few 60s Mad-Men-era Emery Roth-designed office towers were being converted to residential. This works better with much older buildings, because they have light courts. The 60s skyscrapers have vast spaces with no natural light, particular on the lower floors.
The destruction of the American city core was accomplished with a single stroke. We’ll be living with the aftermath for decades.
Same thing with how quickly they can destroy a police department, and how long it takes to rebuild one.
Didn’t the Impoverished Randos open for Queens of the Stone Age at Red Rocks in 2011?
I live in Charlotte, and used to commute to uptown daily – but that was almost 3 years ago. When I first moved here in 2015, there were a half-dozen construction projects going on, new (Charlotte-relative) skyscrapers going up (30/40/50 floors). Probably 50% or so were residential apartment/condo towers, the rest were new office buildings.
The company I work for is selling off its old office space, they built a new tower to get out of a lease for corporate headquarters, and folks are moving in this year. But “moving” in means using an app to book a desk if needed, conference rooms, etc. Very few people who worked in those old buildings in uptown will have a designated desk in the new building, and so many of them transitioned to remote it’s probably going to mean a lot of unused desk space in the new tower.
Charlotte is HQ to a couple of big banks, Bank of America and Wells Fargo. When I would park and walk up to work, I’d see hundreds of easily-categorized bank employees scuttling out of the apartment buildings to walk half a click or so to work at the banks. I’m assuming that same scuttling is happening now, but only in the apartment for most, back and forth to the coffee machine.
Given what I see in uptown, I wouldn’t live there, ever. It’s not dangerous, but at night it’s sketchy, and even during the day you’ll get hassled by stem artists on the walk to the parking garage. I don’t see how an office building conversion would close some massive gap in demand for housing, but that’s Charlotte, not San Francisco.
CA will screw it up.
They miss managed their forests. They will do the same with this. I suspect all it will do is increase the size of “Skid Row”
I’m sure hotel owners are all for it – those hotels forced to house the homeless.
OTOH, those hotels that make a fortune from conventions are probably against the idea of having a cesspool right next door . . .
Interesting. As mentioned, this does introduce some wrinkles in the heating and cooling aspects of the current space envelope. However, it would seem to me that one way of dealing with energy demand in these spaces, at least related to heating and cooling would be to use a common boiler and chiller set up that could provide for all of the new living spaces. This might work best in a rental / lease arrangement, but the boiler could readily provide for hot water demands and whatever need there is for heating and the chiller could provide for cooling demands. You would still need some sort of air handler in each unit to accommodate the individual needs of that user, but it could reduce the electrical needs related to having to add individual heating or cooling equipment otherwise. Just thinking out loud here on how to make this energy efficient and provide a way to meet the needs of the building owner and the apartment / space users.
I don’t think it matters how exactly they convert these buildings to residential. Once they fill them with drug addicted criminals with uncompensated psychiatric disease, this experiment will end quickly.
Or be a model for mandated failure.
That’s the problem. They are often stuck with the general infrastructure they have. They can’t often add boilers, etc.
Assume the office building has three heat pump/chiller units. In the summer they run two for cooling and one for heating. In the winter they switch. That summer configuration is not enough to provide residential hot water and heat for an unexpectedly cold night. So they alter the changeover schedule to stay in winter mode until May instead of April and exit summer mode in September instead of November. If the outdoor temp gets up to 70 in May, the AC will fail.