[+] Case for Office-to-Residential Conversions Begins to Stack Up

New research by architectural firm Hassell and the Property Council of Australia is reigniting debates about the potential to convert office towers into residential complexes. But while the research reveals the surprising scale for potential office-to-residential conversion, even the staunchest advocates of adaptive reuse are saying that the practice is no silver bullet. Underutilised offices in Melbourne alone could provide at least 12,000 apartments for 20,000 residents, according to Hassell principal Ingrid Bakker, but owners of under-tenanted office towers need to closely consider each building on a case-by-case basis. “I was blown away that we found as many buildings as we did, that could work,” Bakker tells The Urban Developer . “I thought we might find 10 or 12 buildings [in the Melbourne CBD]. So, to find nearly 90 buildings where we could apply this idea was very interesting.” Conditions for office-to-resi ripening The Hassell methodology cross-references vacant or under-tenanted buildings against characteristics that make them suitable for conversion. “We’re not talking about every office turning into residential,” Bakker says. Buildings built before 1990, more than 10 storeys and with a floorplates around 24m deep—therefore able to accommodate two apartments with an 11m depth plus a 2m wide corridor between them—are most suitable. ▲ The adaptive reuse of offices to residential has found success in other markets, including this Californian former office building at 8899 Beverly Blvd, West Hollywood, which was converted to condominiums. Overlapping those conditions means buildings are more likely to benefit from conversion, can fit an appropriate configuration of apartments, and have the latent structural capacity for a few additional floors on top, Bakker says. As well as getting the right building, design, planning, and financial considerations are also important, according to Hassell. “How can we be really innovative, in what we do in a design sense, to really unlock the full potential of these sites?” Bakker says. “Potential solutions might be some flexibility around [Melbourne Planning Scheme Amendment] C270, and the Better Apartment Design Standards.” “We’ve got City of Melbourne and Department of Planning saying they’re open for business, and they’re happy to support these sorts of initiatives, which is amazing. “And then on the market side: how do we really view the full picture so that carbon benefits can be given value?” ▲ Built in 1931, 330 Himrod Street, Brooklyn, New York was converted from a warehouse, factory and offices to an 80-apartment complex. Experts The Urban Developer spoke to agree that adaptive reuse projects can reduce the embodied emissions of a building by roughly 40-50 per cent, compared to demolish and rebuild projects. For some developers or tenants, that carbon reduction (along with mandates or financial incentives attached to sustainability) may help push office-to-resi projects into feasibility. The City of Melbourne’s 2040 net-zero target also means the market is being pushed to convert 80 buildings a year, which may be a more aggressive rate than other jurisdictions are willing to incentivise. Hassell says its analytical methodology can be applied to other jurisdictions, but that different planning and economic conditions may yield different results. “The difference with Sydney is around the property values, and the proportionality of rent. Rents are almost double in Sydney, for office space, than they are in Melbourne,” Bakker says. ▲ Alexander &amp; Albemarle is a mixed-use building in Canberra originally constructed as Commonwealth Government office accommodation in the 1960s. The standard 18:1 FSR allowance in Melbourne, which many older buildings are not exploiting, also differs from other cities. “So, the fact that you’ve got an empty office building in Melbourne, allows you to potentially look at this idea of reuse, because it stacks up. But I think there’s opportunities in Sydney, maybe in the fringe areas such as Darlinghurst and Pyrmont.” No silver bullet Owners of the right buildings are set to benefit from coming office-to-resi conversions, but the practice isn’t going to solve broader market woes, experts say. B-grade and below office towers are in the doldrums at the moment, with recent PCA research showing national CBD vacancies are sitting at 12.8 per cent. Demand was negative in the six months to July 2023, with net absorption of negative 21,740 square metres. Meanwhile, the housing crisis is at the top of the political agenda, with National Cabinet agreeing this month to a swathe of new initiatives . ▲ Hassell Architecture was instrumental in the Flour Mill of Summer Hill project in Sydney, a mixed-use ‘village’ with homes, shops, cafes, parks, plazas, laneways and links to new light rail. “If you convert an office building into a residential building, you’re converting to strata, and you’re locked in for 40 or 50 years,” Philip Oldfield says. Oldfield, head of school at UNSW Built Environment, is an advocate of office-to-resi adaptive reuse projects but acknowledges its limited impact on broader markets. “Look, there’s empty office buildings in Sydney. And if we audited them all we might find shallow floorplates can be converted. But it is, in the scheme of the hundreds of thousand of homes we need, a drop in the ocean,” he says. “There’s something of a design mismatch between office and residential buildings. What we find is the examples that have been converted tend to be quite boutique office buildings, shallow office buildings, of which there’s not a huge amount. “They’re converted to premium housing because it’s quite expensive and technically challenging to convert. This is a lever we can pull, but it’s not, in isolation, going to solve the housing affordability crisis. “It’s a niche field, but it’s a growing field. It’s a great idea, but it’s challenging to get it correct.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Case for Office-to-Residential Conversions Begins to Stack Up

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