What to do with empty office space

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What will ongoing remote employment – and a changing workforce landscape – mean to the future of office buildings? 

Pew Research.org reported in December 2020 about 71% of the workforce was working from home, while a recent Forbes.com report predicts about 25% of jobs across North America will be remote by 2023, with even more remote work opportunities opening.  

While some vacant office space sits in limbo, there’s a trend toward repurposing corner offices and open floor plans into apartments – at least in downtowns and urban areas – and smaller office buildings and complexes appear to be the most attractive spaces. 

“What this type of transition [needs] is more demand for multi-family rentals than there is for office leases, and that could become a tipping point for more development,” said Michael Curran, president of Landmark Commercial Realty in Camp Hill, Cumberland County.  

“There has been an uptick for office conversion projects, predominately in smaller building floor plans … between the 10,000 to 30,000 square foot [range] where developers see a use, and it makes sense,” he said. 

A roughly 15,000 square foot building can yield about 14-16 apartments, according to Curran. 

The timing may not yet be ripe for large scale office building conversions, he said. 

“People are witnessing a return to the office by employees. It may not be 100% of what they occupy, but I think there is some optimism [for] some of that vacant space to be returned to occupancy,” Curran said. 

In Cumberland, Dauphin, Lancaster and York the jump to larger office to residential floor plan conversions, or office buildings of 60,000 square foot or greater, hasn’t occurred yet, he said. 

In Harrisburg and its surrounding suburbs, at issue is the value of the office space and what developers are able – and willing – to pay for it. 

“Up until Covid, the market was on fire, everything was good, and the office market was solid,” said Chuck Heller, executive vice president of Landmark Commercial Realty. 

“Right now, office to multi-family residential is a hot topic,” he said. 

If an apartment conversion developer stepped in to buy the building and could only pay $80 per square foot, but the owner owes $110 per square foot, the numbers don’t work, Heller explained. 

According to Christopher Beadling, Pennsylvania Association of Realtors president in Stroudsburg, Monroe County, Realtor organizations support adaptive reuse projects for underused real estate to create more housing options.  

One option is for government incentives to spur office to residential conversions though rehabilitation tax credits, he said. 

“The high cost of construction can make it less financially feasible to convert vacant offices into residential housing, so local tax incentives will help encourage such conversions,” said Gay Cororaton, senior economist and director of housing and commercial research for the National Association of Realtors in Washington, DC. 

BBC.com reported in Worklife May, 2022, a growing trend in major U.S. cities like Washington, DC to create upscale luxury apartment conversions from office buildings, especially those with unique or period architectural details. Because of the pandemic and office worker remote migration, former offices account for 41% of U.S. apartment conversions, the website said.  

Adaptive reuse projects to home spaces – from former manufacturing and industrial buildings – isn’t new.  

A RentCafe.com 2020 report said Chicago has the highest number of repurposed office to apartment conversions, with Philadelphia second, followed by Los Angeles and New York City. 

Kathleen S. Ludwig said state and local governments “especially those receiving federal dollars … should explore high density zoning and innovative ways to convert unused commercial space to multi-family and other residential uses.” Ludwig is CEO of Greater Harrisburg Association of Realtors (GHAR) in Enola, Cumberland County.  

Cororaton said office vacancy rates are high – at about 12% – especially in “gateway cities like New York, DC, Chicago, Boston and Philadelphia.” 

“The high cost of construction can make it less financially feasible to convert vacant offices into residential housing. So local tax incentives will help encourage such conversions,” she said. 

Mixed use buildings, where there are apartments or condos above retail or office space, is a conversation more people are having and “municipalities are really pushing for that,” Heller said.  

He said zoning changes to mixed-use or town center zoning to allow for this type of use were adopted recently in Lower Paxton Township, Dauphin County. 

“And Susquehanna Township is in the midst of changing their zoning. Harrisburg is considering a mixed-use zone with professional or retail and apartments upstairs. We are starting to see it on the township level,” Heller said. 

Melinda Rizzo is a freelance writer