Fact: Multi-family housing is hot right now due to the continuing troubles in the single family housing market. Fact: office buildings are having problems keeping tenants, and many older Class B and C office buildings are virtually empty. Fact: many young professionals want to live in the downtown urban areas filled with boutiques, restaurants and nightlife. All of us are aware of these facts. And real estate developers are acting on it. They are starting a new trend of converting empty downtown office buildings into multi-family apartment buildings.
In Pittsburg, the new River Vue complex will be open for residential tenants after a $45 million conversion of a 16-story former state office building. Local developer Millcraft Industries expects monthly rents of about $1,650 on apartments with river views of the Ohio and Monongahela Rivers. According to Millcraft, the residential units should attract rents of $21 per square foot, as opposed to only $19.50 a square foot for office space. Also, the long narrow shape of the building allows for a layout that will provide a sunny exposure for the apartments.
Another developer, PMC Property Group, Inc., of Philadelphia, is leasing 158 rental units in Pittsburg that were created from the conversion of a 12-story office building formerly occupied by Verizon Communications. These conversions reflect the national demand for more rental units in locations where office occupancy has dropped significantly.
Other cities have experienced the same trend. In the mid-1990’s, developers were converting office space to apartments in Manhattan in order to deal with the excess of office space following that downturn. In Boston, a 40,000 square foot office building near the defunct Filene’s flagship department store is being converted into apartments, with a conversion costs of approximately $200,000 per unit, about half of what it would cost to develop new apartment buildings.
The developers behind these conversions are taking unwanted space and turning it into profitable ventures. While these conversions are a good idea for now, the important thing to consider is that an occupied building brings life into a downtown area, and increases taxes and revenues along with it. This is not only good for the developers, it is good for the tenants, the restaurants and shops in the area, and the city in general. This appears to be a win-win situation for all.
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