Converting commercial property to residential property is a good investment strategy at the moment. Since the pandemic struck, the new normal is a hybrid working model where workers spend alternating days working from home and the office.
That translates to smaller working office spaces and a demand for better working spaces at home. Given the market conditions, CNBC notes that 41% of all apartment conversions in 2020 and 2021 were office buildings to residential conversions.
Some commercial properties are perfect candidates for conversion if the building quality and surrounding amenities are right. However, note that not all office property is suitable for residential conversion. This guide provides insight into converting office space into residential property.
Can you convert commercial property to residential property?
Yes, if the property zoning and housing laws allow. Local governments have rules that distinguish specific areas for commercial and residential properties.
If you want to convert commercial space into residential property, the best place to start is to familiarize yourself with local building laws. If you have more questions, schedule a meeting with a county clerk.
Aside from laws, an investor must ensure the building they want to convert is up to code. This is necessary because contractors build commercial and residential properties for different purposes. Structural requirements differ and include factors like water and electrical lines and entry points.
Successfully converting commercial property to residential depends on zoning laws and your ability to renovate the property to meet housing standards.
Factors to consider before turning a commercial property into residential
1. Costs
As you look at a potential commercial to residential property deal, analyze the potential renovation costs. You will need to hire experienced construction staff and specialized designers to ensure the project meets the legal standards.
Additionally, you need to factor in the building and material costs. These costs can quickly escalate during the conversion process.
2. Exterior layout
The exterior layout plays a big part in commencing an office conversion project. Traffic flow is another factor that may affect the success rate of converting a commercial building to a residential one.
That’s because some office locations prevent easy access to and from the building. You may succeed in converting the building, but the location will determine whether the switch makes sense in the long run. In short, the right infrastructure will decide whether or not you can convert a building successfully.
3. Time
Depending on the size of the project, the process may take a long time. Investors will need to start with the permit application process before beginning renovations. This process may take a few weeks to a couple of months.
Before moving forward with the deal, analyze all the above factors to ensure a smooth conversion process. Remember to factor in all the costs to allow for the best returns on this investment.
How to convert office property to residential property
Keep the above mentioned factors in mind as you begin looking for commercial property to convert. Only consider listings that make financial sense and are eligible for conversion.
Since area laws differ, you may want to consider this before investing in areas outside the local zone. Having this information determines whether there are extra steps you may need to take.
Below is an overview of what you need to implement an office to residential conversion project:
- a) Understand zoning laws. You need planning permission to change offices to residential units.
- b) Next, look at the structural design and determine how you’ll create residential units that fit the current market requirements. The factors you need to look out for include:
- What is the best residential use in the market? You’ll need to consider between rentals or condos.
- What is the best size for the units?
- Consider creating a co-living area or an interior courtyard for a large floorplate.
- Study the floor plate to determine whether you need to reduce passenger elevators.
- Does the building exterior comply with energy code and ventilation requirements?
- Identify whether the building’s codes comply with yard requirements.
Potential Challenges of Office to Residential Conversions
The biggest challenge that an office to residential conversion faces is the office floor plate depths, which is a problem that is more common in modern office designs. In addition, some buildings feature designs that limit natural light and air.
This poses a problem if you are trying to convert to small residential units, but it is not an issue if you intend to convert it into large rentals. However, you will face competition from smaller units with a more uniform design.
Newer residential properties have about 35 feet between a window and corridor wall, which is not applicable in commercial office spaces. It will take a lot of creativity to convert a modern office into a residential space.
The best option is to choose co-living designs instead of the typical one or two-bedroom apartments. This design guarantees a better success rate when converting from office to residential space. Additionally, the shared living arrangements encourage less space wastage.
The Potential Future of Office to Residential Conversions
It is too soon to say that more investors will join the office to residential conversions bandwagon. That’s primarily to do with the restrictive zoning laws regarding rear yard spacing that make it illegal to conduct the conversions.
When the laws came into play in the 60s, building conversion regulations only had in mind small office buildings, not the behemoth offices that investors want to convert into residential places today.
During that time, regulations required buildings to have a minimum of 20 feet of yard space. Residential buildings need to have at least 30 feet of yard space as a zoning requirement. There haven’t been significant revisions to the laws to account for office buildings post-1961.
Today, developers remain tempted by the office to residential conversions because of the mere fact that they do not need to build, excavate or perform any massive construction. Instead, most of the work is internal, like changing layouts, but nowhere near the kind of work needed when building a project from scratch.
However, considering the bottleneck of rear space required by zoning laws, many shun the projects as it would mean physically reducing the footprint of the building. That is no easy trick and remains the biggest threat to the office to residential conversion.
It seems like the mixed-use or hybrid properties will be the most appropriate way to cater to the office and residential usage.
Final Word
Before embarking on an office property to residential property conversions, you need to identify the best size for the units, whether to turn them into rentals or condos, and how to carve out an interior courtyard.
That’s because zoning stipulates that you must have at least 30 feet of rear yard space; otherwise, the local authority will disqualify your application for office block conversions.
