Here’s a puzzle that can make your head hurt: How can you convert an old office building into apartments? It’s a question on the minds of a lot of people in New York City
Lesson summary
Hi there everyone, I’m Jeff and this is Plain English lesson number 559. Here at Plain English, we help you upgrade your English with lessons about current events and trending topics. If you’re into real estate, architecture, city planning, construction, or engineering: this will be a good one for you.
How to take an old, empty office building and breathe new life into it? There are a lot of challenges. But for those few developers who can do it right, there can be big rewards. And cities need all the help they can get in their business districts.
In the second half of today’s lesson, I’ll show you how to use the English expression “get wind of.” And JR has a song of the week.
The full lesson resources for today’s episode are at PlainEnglish.com/559. That, by the way, includes a free transcript. Let’s dive in.
Breathing life into old office buildings
New York’s office vacancy rate is about 16 or 17 percent. That means about 17 percent of all the space inside office buildings is currently empty and available for rent.
That’s high by historical standards. But even that covers up an uncomfortable truth. The newest buildings are doing very well. They have great natural light, good air quality, are in the best locations, and have good amenities. They have no problem attracting tenants, and they fill up.
But some old buildings are really struggling—large blocks of floors sit empty. These buildings were built a long time ago. They don’t have efficient floorplans. They don’t have the upgraded wiring that’s needed for a modern office. They’re not energy efficient. The elevators aren’t very fast. They’re maybe not in the best locations for an office today.
What to do? One answer is to convert them into apartments. And New York City is desperately short of housing units. So this looks promising, and a lot of real estate developers are now looking at converting old offices to apartments. But this is not a job for the faint of heart : it’s one of the hardest things in real estate development.
Most challenges are physical. A floor in a typical office building is a big square, with windows around the outside, and a vast amount of space in the interior. There are elevators in the core of the building. The plumbing is usually also concentrated in the interior of the floor.
It’s a challenge to reconfigure this for apartments. First, all apartment units must have an operating window in every bedroom, and the window has to open and close. Many offices don’t have windows that open and close.
Second, if you concentrate bedrooms around the exterior, where the windows are, that still leaves lots of space in the interior with no windows and no natural light.
Developers have found a few options here. One is to make the interior space a “home office.” Some developers are even putting two “home offices” in the same apartment.
Here’s another idea. Older office buildings are often tapered. The building narrows toward the top. Stand on the street and look up at some of these old office buildings: as you look up higher and higher, you’ll see the floors become smaller and smaller . That means a developer could convert only the highest floors into apartments—the narrower ones, which are easier to configure—while keeping the lower floors for commercial space.
A more radical option goes like this: carve a courtyard out of the central core of the building, and put windows in interior space that faces the courtyard. It’s expensive, but it’s being done in several projects in New York right now.
There are other design challenges. Offices tend to have more elevators than apartments of the same size. That’s because an office needs to accommodate a rush of people in the morning and evening, and there are more people in an office than in an apartment building of a similar size. This is wasted space that can’t be reclaimed for anything else.
Plumbing is an issue, too. Most office buildings have bathrooms near the central core and limited, or no plumbing, throughout the rest of the floorplate. An apartment conversion requires extensive plumbing renovation to install bathrooms and kitchens.
But imagine you found a building that’s perfect for a conversion. It’s 60 percent vacant, so the owner is probably looking to sell the building. You have some good ideas to solve the layout. You want the building—there’s just one problem. If it’s 60 percent vacant, that still means it’s 40 percent occupied with office tenants.
And those tenants might have the right to occupy that building for ten, fifteen, even twenty more years. If you want to convert the building, you have to buy them out of their leases—you have to pay them money to leave before their leases are up. And if they get wind of your plans, they’re not going to leave for a low price.
I told you this was a puzzle that could make your head hurt. And the truth is, a conversion from office to residential is not going to work in the vast majority of old office buildings. The challenges are just too great. But it will work for some.
The farther old office buildings fall in value, the better this looks as an investment. Manhattan apartment rents are at record highs and keep pushing higher. So the gap in value between apartments and offices is growing. And when that happens, the rewards get bigger for any developer that can solve this puzzle.
The city government can help, too. As you learned on Monday, the city has a strong interest in keeping its buildings full , and paying full taxes. New York real estate is full of Byzantine rules from decades past that don’t make much sense today. Zoning rules can be relaxed, permits can be expedited, tax incentives can be extended.
This strategy worked to convert offices in Lower Manhattan into apartments after the 1987 stock market crash and the September 11 attacks. In the 1970s, just 700 people lived in the financial district of Lower Manhattan. Now the number is almost 85,000.
Even if the conversion strategy is successful, there will still be a large, troubled cohort of office buildings. Buildings constructed in 1960s, 1970s, and 1980s are in the most trouble. They are too big to be converted into apartments, but too old to be desirable to modern tenants. They can be renovated into better offices, but that’s not a good investment now: there are just not enough office tenants to fill the space and pay back the investment on the renovation.
Owners of these older office buildings—and the banks that lend on them—are in for a rough couple of decades.
Conversions are only a small part of the solution
Converting is a good idea and cities should encourage it when it’s feasible. But it’s not going to be enough—only one or two percent of old buildings are going to be convertible in this way. So if cities want people back, they’re going to have to find another way to add places to live.
The crazy thing about New York is—you think of it as a city that’s full of skyscrapers. But it’s really not. There are lots and lots and lots and lots of four- and five-story walkup apartment buildings in Manhattan, right in the middle of everything. I lived in one—steps from Central Park.
But in New York they have this crazy zoning system that means you can have a super-tall, pencil-thin tower on one block, going 80 or 90 stories in the air, surrounded by five-story buildings for many blocks around it. But untangling all of that would be a real mess.
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