Out With Business, In With Housing
Posted by Richard on December 13, 2023
Remote work has upended the commercial real estate market and many companies are downsizing their offices to better match a workforce that largely prefers to work from home. Amid slumping demand, property managers are looking to convert some or all of their office space into residences.
In order to monitor and direct real estate development, most communities zone specific areas. If a property is zoned for commercial use, you typically won’t be allowed to build private residences on it. Now, some local governments are scrambling to make it easier to rezone areas and properties.
A recent proposal from New York City Mayor Eric Adams could make it easier to rezone and convert office space into living spaces. These conversions are already steaming ahead in Chicago, San Francisco, and other locales. Given that much of the work in Silicon Valley can be performed remotely, this trend could be particularly disruptive in San Francisco.
The moves are no surprise. Basic economic forces dictate that supply should shift to meet demand. Housing demand in many places exceeds supply. At the same time, the current supply of office space outpaces demand. This can drive prices down, potentially to a hard-to-sustain level. By converting offices to housing, it may be possible to solve the problem. Additional housing hitting the market could cool rising prices of homes and rentals, while reducing supply may make office buildings easier to sustain.