Get ready for a big downturn — America's 'office apocalypse' is even worse than expected
, almost a third of cities said they'd be in a difficult financial situation in 2023 once federal funds dissipate. In the event of a recession, things could look much worse. While there's been a lack of demand for commercial real estate, the residential market has gone into overdrive. A recentsuggests the new space requirements of remote workers — space for a desk or office, or to accommodate the extra time spent at home — have helped cause housing costs to skyrocket.
The solution to the office-housing conundrum seems obvious: Turn commercial spaces like offices into housing. Empty offices can become apartments to ease housing pressure while also bringing more people back to downtown areas. But after two years, few buildings have been converted. Jessica Morin, the head of US office research at the commercial real-estate firm Coldwell Banker Richard Ellis, said there hasn't been a"noticeable increase" in conversions.
So what's going on? Simply: The costs to convert are often hard for developers to justify. Construction costs are assessed on a building-by-building basis and need to take into account structural issues such as floor layouts, plumbing, and window access. Residential buildings also have to accommodate shared spaces like hallways, meaning they generally have less rentable space than an office building.
Another barrier for office-to-residential conversions is local housing rules. To turn commercial buildings into housing, they would have to be rezoned — which requires input from community members and local officials — to meet specific requirements. Codes for everything from lighting to
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