Work from home could lead to more homes in vacant offices

Most Americans know the No. 1 rule in real estate: “location, location, location.” But for some developers, there’s a new winning strategy: “recycle, recycle, recycle.”

Most Americans know the No. 1 rule in real estate: “location, location, location.” But for some developers, there’s a new winning strategy: “recycle, recycle, recycle.” A growing number of office buildings have found second lives as apartments, boosted by the Covid-era work-from-home movement that slashed office attendance and thinned out cities’ downtowns. But breaking up sterile, expansive workspaces into inviting homes is harder than you might think. Real estate developers say these projects can be like working out a puzzle: Office buildings are designed with very different considerations than apartment dwellings. Some conversions aren’t possible, and unexpected costs can add up. Even so, as office vacancies hit a record 20.1% in the United States in the second quarter of this year, according to a recent report from Moody’s Analytics, and the supply of homes remains persistently below demand, local governments have upped incentives for office building conversions. These include tax breaks and speedier approval processes for real estate developers willing to remake the spaces. Nearly 70 million square feet of office space, or 1.7% of the total US supply, was in the process of being converted for other uses in the first three months of 2024, according to a recent report from commercial real estate firm CBRE. Sixty-three percent of those conversions are expected to be into multi-family housing. At first glance, The Crosby, an apartment building that opened in 2020 in Los Angeles’ Koreatown neighborhood, seems like a typical luxury high-rise. It boasts plush amenities like a fitness center and pool deck. Residents of The Crosby’s 336 apartment units may not know, though, that their building was the former West Coast headquarters of oil and gas company Texaco.