Questions abound. Assume you can convert offices into homes, who wants to live in them? Is a tear down cheaper? 
To ease the housing crisis, White House Opens $45 Billion in Federal Funds to Convert Offices Into Homes
Taking aim at the nation’s housing crisis, the White House kicked off a multiagency push on Friday to help real-estate developers convert more office buildings emptied by the pandemic into affordable housing.
The initiative aims to harness $35 billion in low-cost loans already available through the Transportation Department to fund housing developments near transit hubs, folding the initiative into the Biden administration’s clean-energy push.
It also opens up additional funding sources and tax incentives and offers a new guide to 20 federal programs that developers can tap and that offers technical assistance in what can be tricky and expensive conversions.
A third part of the program will see the federal government draw up a public list of buildings it owns that could be made available for sale to help bolster development.
The federal government owns about 1,500 office buildings nationally and had leases on almost 200 million square feet of additional space as of April, according to Barclays analysts, who said in a recent report that much of that office space was underused.
Questions Abound
Also consider San Francisco’s push to turn office buildings into homes hinges on this simple idea
“Hope is not a strategy,” said Nick Romito, co-founder and CEO of VTS, a leasing and asset-management data company. “The hope that if you convert it, they will come —well, a lot depends on where that building is.”
While New York City’s downtown financial district is home to a number of successful office-to-residential conversions, it also takes a vibrant neighborhood, with bustling cafés, grocery stores and more.
“That is not the same for San Francisco,” Romito said. “The infrastructure and the cost of converting a building — that’s part of it,” he said. “But I’d be more concerned about, even if you can convert it, who wants to live there?”
“What’s cheaper?” Romito said. “Is it cheaper to add amenities in maybe a zombie building, add a floor or two, to create a better experience? Or is it cheaper to knock the entire building down, rebuild something else, and pray to God you lease it?”
Warren Wachsberger, CEO of Aecom Capital, a subsidiary of Aecom ACM, said revamping old office buildings isn’t that simple. “Less than 1% of all apartment units underway, being built nationally, are office-to-residential conversions, despite everybody’s love affair with them,” Wachsberger said, speaking from Los Angeles.
“Many buildings probably won’t work,” Wachsberger said, observing that thick, concrete office floorplates often need to be drilled through and plumbing and heating systems overhauled, with local building codes adding to the headache.
“It’s a lot easier and cheaper to demolish it and start over from scratch,” he said. “That means buying buildings essentially at the cost of land.”
Wachsberger said hopes for an expansion of an office-to-residential conversion effort in Los Angeles in the 2000s likely hinge on incentives for developers and the buildings being in places where people wanted to work, eat, live and shop. “Until that’s able to come back, it’s difficult to create the vibrancy that was there prepandemic,” he said.
Simple Idea
I had to read that article twice to find the simple idea mentioned in the headline. The article never really explained. But I believe It’s in that last paragraph above: Incentives and free money from governments.
With enough subsidies, developers will try nearly anything. Then when the projects fail, the developers ask for more money.
Clean Energy Question
What the heck does this have to do with clean energy?
The answer is clearly nothing. Nonetheless, $45 billion is siphoned from the Biden administration’s clean-energy push.
The government has 1,500 office buildings nationally and leases on almost 200 million square feet of additional space that it does not need. Instead of canceling leases and selling the real estate, it’s going to convert them into clean energy spaces.
Biden’s Green Energy Inflation Reduction Act Needs a Big Bailout Already
Please note Biden’s Green Energy Inflation Reduction Act Needs a Big Bailout Already
Surprise, surprise. Subsidies were not enough to make Biden’s energy projects profitable.
The Inflation Reduction Act (IRA) includes hundreds of billions of dollars in subsidies for green energy, yet now renewable developers want utility rate-payers in New York and other states to bail them out.
According to a report late last month by the New York State Energy Research and Development Authority (Nyserda), large offshore wind developers are asking for an average 48% price adjustment in their contracts to cover rising costs. The Alliance for Clean Energy NY is also requesting an average 64% price increase on 86 solar and wind projects.
What Will This Office to Apartment Conversion Ultimately Cost?
Supposedly, this office conversion idea will only cost $45 billion.
I assume it will eventually cost $450 billion minimum by the time Biden finishes. He is guaranteed to add subsidized low income, clean energy, free electric heat, and free child care into the mix.
Guess it’s time to try to figure out how to appear to be a qualified developer near one of those “hub” thingies. Appearance is key.
Downtown office buildings were being renovated for residential occupancy this summer. These are not affordable units. Across the country, expensive hi-rise condos are being swept-up by former crypto investors, exchanging sham currency for real equity. These are investment properties. At night, a majority of the rooms are dark. Biden uses inflationary national debt to fund crypto investors wallets.
If this idea had any economic merit, real estate developers would already be doing it without a BRIBE from the Biden regime. An illegitimate government run by half-wit bureaucrats, with a senile crook as the figurehead in the oval office, is borrowing money it cannot and will not ever repay, to bribe political supporters and buy itself a little more time before collapse.
This $45 billion means less than $1billion per state (guess which states didn’t vote the way the DNC ordered, and wont be getting bribes?). It won’t cover more than a few select Biden supporters… cough “conversions”… even in democrat led cities.
And if any real estate developer believed this bullsh!t, they would have started converting the buildings over months (arguably years) ago. It simply doesn’t make economic sense on its own merit.
That is why the developers need to be bribed. It simply doesn’t make economic sense on its own merit.
Lets see if Generation Z is going to put down their avocado toast and starbucks long enough to repay Biden’s empty promises.
“If this idea had any economic merit, real estate developers would already be doing it without a BRIBE from the Biden regime. ”
I’m curious as to your thoughts on the developers that built & paved the highways un the Eisenhauer regime?
bingo.
Eh, I live in my office. 60 hours a week.
Seriously, what a waste of money. If there is money to be made the private sector will be happy to do it.
This isn’t about making money.
This is about helping friends.
whorehouses provide value for society.
1) Demolition causes more pollution than cow farting. Use what u got, or lose it. The
zombie areas might become whorehouses and drug infested areas without gov intervention. The gov will provide most of the funds to the regional banks, but not 100%.
2) The regional banks might provide 3%/4% 30Y subsidized mortgages.
3) Private investment co will provide 20% bridge loans – the banks 80% private 20% – to invest in viable projects they select.
4) Either to sell, or collect rent.
in nyc i think like 70% is slated to be converted to what they call life sciences…….labs and doctors and such. with much smaller to residential. the rents too low compared to commercial. woolworth building went half and half years ago. why not just pay raytheon to bomb the city centers of boring cities nobody wants to live in…………maybe trump or biden can declare war on flyover country cities……….i don’t want to hurt any humans, just blow up the vacant offices in stupid cities in flyovercountry. maybe take out half of downtown SF and Boise and Dallas etc……. etc…………make the spaces parks………..twofer
NYC is rapidly going the way of Detroit. Love it or hate it, the financial industry provides 70% of NYC economy. The bulge bracket firms (Goldman, etc) are struggling, the money center banks only exist because of massive federal reserve subsidies, and hedge funds are fleeing the city along with their customers and portfolio managers.
As goes NYC’s main economic engine, so goes NYC. Gotham is dead. If NYC voters get rid of the marxists running their city and state into the ground, perhaps it might stage a comeback in a few decades? That’s a huge maybe at best. For now, NYC is in epic decline
marxist bankers. you are an idiot. but good for a laugh. yea, JPM is a regular kibbutz. with jamie dimon pulling kitchen cleanup duty tonight. FFS you nitwit, downtown is already residential and colleges and tourists. the 9.11 memorial literally has a beer garden. they’ll be soon building and osama bin laden flume ride for the rich tourists who love the ghoul stuff. it’s disneytown from downtown to broadway theatre. just a tourist town. brooklyn and queens is where everyone works out of their homes……….bustling. go back to the holler and milk the goat. just no beastiality please, we have a very pious speaker of house now. laugh you clown.
I didn’t see mentioned that cell service might be problematic in converted office buildings because of the amount of metal used in commercial construction vs. residential.
Do you REALLY think cellphones don’t work in business buildings?!? It’s easy to put boosters and wire for WiFi Calling.
It’s easy in an office building where it’s done as part of the network.
It’s a different story when the need is to support multiple vendor choices (AT&T, Verizon, T-Mobile, Comcast, etc., etc.). Whew.
I’m inclined to go with David on this one, lest we think employees have to sign up for company approved plans, and the fact that my own cell works fine in office buildings.
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Suggest you don’t just blindly accept what you read on the internet. David doesn’t know what he is talking about.
When you are in an office building, the company provided Wi-Fi boosters and amplifiers throughout the space. The Wi-Fi goes through the company network.
When you are living in a converted apartment that was previously an office building, the materials used are substantially different than what is used in residential construction.
If you have internet cable coming in over cable or phone lines, the attached modem/router will generate the Wi-Fi that you can use anywhere in your apartment.
However, if you want to use your actual cellphone service and not Wi-Fi, then your signal may be weak or totally blocked due, again, to the construction materials used.
Capisce?
Nope. First, many phones now do WiFi calling, so you aren’t even using Cellular. Second, plenty of signals in major cities.
Made up “problem”.
It’s always annoying attempting to discuss something with someone who thinks they know everything.
Run this search. Below is one hit:
link to google.com
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Your Building’s Materials Block Out Cellular Frequencies
Another common reason for poor cellular reception in an office environment is due to the materials that the builders used when they constructed the building. Materials such as concrete, brick, tinted glass, and metal can create dead zones in certain spaces. If you consistently lose signal when you enter an elevator, go down to the basement, or take the stairs, these dead zones might be due to a greater presence of concrete or metal in these areas.
link to coruzant.com
Jojo,
You’ve gotten worked up over this, and relative to topic, it’s not a big deal.
I work in commercial spaces very often, cell reception isn’t a problem, but even if it is – it’s not so big a problem that it would affect infrastructure decisions, such as whether to convert commercial to residential.
Chill out, man.
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Interesting.
I keep WiFI on my cellphones turned off unless I need to use it for a specific call or purpose. Provides the automated hackers with one less target.
The President could care less if $45B successfully converts CRE into occupied residential housing. This is just old fashioned fiscal stimulus and a CRE bailout of blue cities. The goal here is nothing more than to stimulate urban economies and municipal patronage, going into the 2024 election.
Nonsense. 30% vacancies in major cities, caused by the two most recent administrations. Someone needs to clean that up. Three birds with one stone. Decrease the Office Vacancies. Improve the Housing Stock in areas with high CRE vacancies. Build more livable cities and decrease the cost of living by dropping housing and rental costs in some of the most overpriced markets.
Wins all around.
“Nonsense. 30% vacancies in major cities, caused by the two most recent administrations. Someone needs to clean that up. ”
There’s only one administration official responsible, Al Gore, for inventing the internet.
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How long will it take to build some new “livable cities” with cheaper housing and rental costs?
Just asking for a friend.
” This is just old fashioned fiscal stimulus and a CRE bailout of blue cities. ”
Which cities has it been allocated to?
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Start by converting the Willis Tower in Chicago to migrant housing. WillisTowersWatson and United Airlines will welcome them with open arms, just look at their websites, ESG and DIE scores.
IIRC a large amount of CE is soon to be owned by banks. When tenants moved out and new one can’t be found, the loans don’t get paid. Ergo, bank ownership. This scheme seems to be a lifeline to banks that are stuck with CE they can’t rent.
Brilliant.
Turning CRE into Residential living space, is nothing new. In fact, in my town right now it is being debated, as it is in surrounding towns as well. Some have already turned Malls and Office Space into Apartments, Condos and a Mix too. It seems to be working out very well.
What is new however, is the Federal Government getting involved. Real Estate cannot be allowed to be used by the Federal Government, as it will become a cudgel to get their Agendas Passed! They will Force Owners to rent to tenants against their will. They will mandate through penalty what you can and can’t do on and/or with your property. All individual control over your property will be determined by the Government.
My State has mandates for such things, as most states do, if they choose to, and should be able to. Voters can decide if those decision makers should stay or go, in a small workable town situation. Also if the laws passed should stay, or go back to the way it was before then.
If we choose to turn our Mall, into what is currently proposed low cost, affordable local worker housing and condos for lower cost home ownership. Some mixed use retail, finance, exercise, food, and the likes, is currently being debated for the first floor, we should be able to do so.
This will also help our town meet quotas for percentage of low cost housing and/or rental property overall. Some towns are even considering senior living, which I think is desperately needed. It’s all good, and as retail/commercial fades, it won’t be left as unattended, and decaying buildings littering the landscape for no reason. Just my two cents.
The government can give Joe Bidens brother a loan to develop these properties. His brother can repay Joe Biden personally and write “loan repayment” in the memo section of the check. (sarcasm)
One of the problems with both real estate and renewables is the need for large amounts of borrowed money at current high interest rates. Which are making these projects uneconomic.
I prefer investing in a sector where companies don’t need to borrow much, if at all, and are even paying down (or eliminating) their debts.A sector that benefits when renewable energy projects struggle to be built.
Exxon and Pepsi.
Pepsi?
Pepsi has 19 billion of share equity and 44 billion in debt. Debt to Equity ratio of 236%.
Exxon has 207 billion of share equity and 41 billion of debt. Debt to Equity ratio of 20%.
CNQ 30%. MEG 31%. CVE 31%
Best to gauge debt/earnings according to industry, as with P/E, each sector has different debt metrics.
Sure. Different sector. As I said, I prefer a sector with low debt in a high rate environment.
So you are recommending Pepsi then?
“So you are recommending Pepsi then?”
No, Coke has a dramatically better sheet, but I wouldn’t short Pepsi either. (Rev growth)
I think in terms of arbitrage when talking buying based on debt, where Pepsi has high debt and, say, a smallcap pharma has no debt, I wouldn’t suggest shorting pepsi against the other based on debt ratio alone, I’d look at coke or other food MFG’s.
I wouldn’t compare energy sector stocks to Pepsi on debt alone.
I’ve been voraciously shorting small/microcap for a year against other stable co’s, it’s working extremely well.
The FED completely alters trading strategies, my point was on comparing company to company outside sectors.
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Somebody tell Joe that the govt has already made a disaster of the housing market.
He won’t hear, er, care, but tell him anyway.
Things are zoned certain ways for a reason. Like, there may be no schools for children to go to from an office building. So more infrastructure needed than just changing offices to bedrooms and bathrooms.
SOME things are zoned for a reason. Others less so. The reasons aren’t always good ones.
Metro areas are compromised of several to many cities and counties. Each has their own philosophy for zoning.
Long story short, converting tall urban office buildings to apartments might be expensive. Converting low rise suburban offices might be profitable.
Both have zoning problems. Multifamily housing is illegal in many areas where conversions might make sense because of local zoning rules.
Rich suburb cities keep poor people out of their schools by using zoning to prevent the development of affordable housing.
If the office building is big enough put the school in the building. Shops at street level, school next level or two up, residential up the rest of the way.
If there is an extra hotel in the area that is much easier to convert to an apartment. It has the plumbing in each unit already.
Soon to be ghettos.
Soon to be ghettos. Well that depends on if the conversions are done to provide apartments for private buyers and investors seeking to lease to market price paying renters. That will keep the ghetto trash from forming ghettos as they can’t afford to buy ir rent there.
Or if the subsidies are to provide taxpayer subsidised low rent accomodation for welfare bums and illegals. Hello the Projects and their denizens.
A visitor from Mars would think the US and Canada is experiencing a sudden, mysterious population explosion. The Martian media was reporting these were mature, stable, rational places.
Say, maybe the US Gov could find someone with real estate development experience to run the program. Someone with both RE dev experience *and* experience at the highest levels of government.
Spending chump-change on real estate development is, after all, a core duty and reason for the national government, so this whole idea should be taken very, very seriously.
Commercial real estate investors and banks benefit. Properties financially underwater now have a chance of surfacing for a gulp of air. Of course turning commercial buildings into apartments is a crummy idea because people are leaving cities for a safer life in suburbia.
NOPE. Plenty of people left the cities during the shutdowns. Now many are returning to cities. If there’s enough housing, many more people will live in cities.
Cheers!
Yup. The horde is streaming in from the South to the cities in the North. Free food, free shelter, even free money.
There was a good Bloomberg Odd Lots program about converting offices to residential spaces. link to bloomberg.com
No need to have a government program to do it. If it is feasible, and many times it is, then it will be profitable for private enterprise to do it. It has been done before.
Where government money could be useful in the process, would be the upgrade of infrastructure, such as sewer, water, or schools, if the existing infrastructure couldn’t support the additional people.
But incentivizing companies to convert will only be a waste of money.
Sounds like the most sensible and useful posting here. 100%.
Two of my former schools, elementary & high school, have been converted to high end condos.
Offices would be easier to convert, in light of ongoing home prices and the slump in CRE as commerce shifts from brick/mortar to online, this seems a smart idea to ease the housing pinch. It also seems inevitable, that commercial space will eventually have to become residential.
Now, let the down votes proceed….
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Location, location, location. Let the private sector pick and choose office to residential convertions, and the location is found. Let the government pick the location, and the Aleutian islands come to mind. It’s called skin in the game.
I plan on having no skin in game
funded entirely by biden regime of course
How about “LOANING” the money, NOT giving it away as usual!! Taxpayer gets no direct benefit and as usual gets NO EQUITY stake in the process,
why the hell not, it’s our hard-earned money!!!! Just like the $ 52 Billion of taxpayer money being given to chip companies, WHY? They’re public companies and can raise the money, why give them OUR money and no equity??? K-Street SUX! And so do the decision makers who screw the taxpayer!!! How about we get some actual representation from CONgress Critters! THEY work for US, not the other way around, wake up Sheeple!
What’s the point in being a politician if you can’t give Government money to your friends and bribe voters?
I gave you a downvote. I don’t tend to opine on how a particular vascular surgical procedure is easier than another one because I know nothing about the topic. Maybe there is a lesson there somewhere.
And If it’s a smart idea to convert offices to housing which in some cases it might be there is no need to give rich developers free money to do it. I’ve had enough of active subsidies for connected businesses. Apparently your appetite at that buffet is nearly unlimited.
I reciprocally down voted you, for the fact that you assume so much out of what I said.
For starters, I despise special treatment for “friends” of the government, I’ve lost countless business over the years to them.
That said, the base premise, relative to other government spending, is a pretty damned good idea for the reasons I mentioned.
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Biden will throw $45B at ANYTHING!
This isn’t a bad idea. That arrives when you have a president who thinks almost everything needs a subsidy to be viable.
FJB!
As the article mentions above, it is expensive to do that conversion. Offices are designed for shared restrooms and shared heating/cooling systems. It is a substantial expense to change that. The biggest problem of course is pure inertia, the fact that the office building is probably owned by a company that only knows office buildings and has little interest in residential spaces. Not to mention that it probably still has quite a few leases that need to be run out on the books.
So the developer has to not only purchase the property from the owner, but buy out the leases, which, depending upon the language of the contracts may be difficult or extremely expensive to do. Which is why we have very few office to residential changes, lots of money-losing half-empty office spaces, spiraling housing prices and mass homelessness.
I am extremely confident though, that no one is going to come up with any better solutions. If developers were going to do it without subsidies, it would already be done.
There’s nothing wrong with the idea, and I doubt it would be as expensive tearing it all down & rebuilding from the ground up.
Just do it without government subsidies.
“As the article mentions above, it is expensive to do that conversion. Offices are designed for shared restrooms and shared heating/cooling systems. It is a substantial expense to change that….”
Finally an actual argument vs blindly flailing at “government spending” or “Biden”, and yes, it’s expansive.
However, less expensive than starting fresh, the structure is there, just has to be piped, sub-divided and wired.
Far less expensive than building ground-up.
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Yes, this is a smart move. There is simply too much office and retail space and not enough housing. It also helps revitalize downtowns. Housing isn’t a free market and we need vastly more supply.
Nope! What we need is a big recession to restore price stability.
It wouldn’t hurt to have controls around investment owned properties.
Big money is taking over housing which is just flat out wrong.
The average Joe can’t compete with that.
Yes, institutional investors and foreigners need to be banned from purchasing single family real estate. They should only be able to purchase multi-family real estate.
Schools are a lot easier to do because they normally come with lots of land (playgrounds / sports fields etc). Also schools tend to only be 1 or 2 stories tall.
Office towers will essentially need to be torn down and rebuilt (as the article suggests) because they aren’t designed for residential.
One and two story buildings might be OK if they come with some land like schools do.
Ultimately this is just going to be 45 billion wasted dollars that get ‘stolen’ by developers who attempt to do this just to cash in on getting the money.
what is the alternative?
And how about putting these wasted shopping malls to good use as well?
IThe government is coming for everything I have in the form of bankruptcy. After all, it’s all theirs ultimately. Just ask them. They know what’s best for me.
You finally realized that! 😅
at least my wages would keep up with said inflation(ie devaluation)
and maybe make buck or million
failure – govt gets that when I walk away
I will never, ever ,ever vote Biden agian. His policies allowed illegal aliens to flood the nation instead of taking care of American homeless problem first. They came up with billions for housing migrants in NYC luxury hotels like the Roosevelt. They removed poor American citizens from shelters in the Bronx and Brooklym to house migrants , too. Now, they want to convert office buildings in major cities because of the worsening housing crisis his administration help to create. This money was nowhere to be found, leading to government shutdowns when it came to putting American citizens first Unbelievable.
I was going to upvote you but the fact you voted for Biden in the first place tells me you know nothing about his history as a politician
Tell me you know nothing about homelessness in NYC without telling me you know nothing about homelessness in NYC. Lmao.