Why isn’t anyone turning the homes-to-office spaces back into homes?

[Discussion]

Earlier today I noted an article about the redevelopment of 1201 Connecticut Ave NW at the southern end of Dupont into an apartment/condo community.

But you walk around the Dupont neighborhood and you see a bunch of 100+ year-old houses that had been converted into commercial space, and now they’re fully vacant. Some of them are pretty large and could easily fit at least 6 apartments, more if you skimp on square footage. So why isn’t anyone buying those up and turning them back into residential? It’s not the same as a new ten-story complex, but it’ll arrive much faster.

Maybe someone is doing this and I haven’t heard, but it seems like an obvious investment.

in washingtondcby MeghanClickYourHeels

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GuyNoirPI

It’s tricky to do those conversations. I know those specific properties were previously residential but there may be challenges that make it not worth it.

LeoMarius

It's worth it because the land is so valuable. These buildings aren't viable as offices, so even a teardown is preferable to maintaining a building losing money. How long are you going to hold onto a near empty office building, pay for maintenance and taxes, while housing prices are high? It's not like the office space will ever get rented again.

MeghanClickYourHeels

Tearing down is a non-starter for historic buildings, which many of these are. They’d have to be beyond rehabilitation for demolition to be approved.

LeoMarius

Then you remodel with a façade.

Again, the long term prospects for offices are dim. So you either invest now, or hold and lose money, then remodel.

soccerman55

The OP is talking about townhouses so not giant buildings. These may have a benefit of being boutique locations or owned by the business using them reducing the incentive to convert them.

afrosupreme

Alexandria

I think you are underselling the long term prospect for them being offices again, in the same way people in the past did the same thing regarding people's desire to live in a city.

Sunbeamsoffglass

The cost to redevelop has to be worth the potential income. Residential units rent for far less than commercial ones.

Between that and the permitting cost and struggle…it’s easier to just use the losses as a tax write off. Especially people with high income who need a tax shelter.

LeoMarius

You are going to have to pay to maintain a building. There's no prospect for many of these buildings to become profitable as offices again. So, you have no choice.

annang

DC / Crestwood

DC doesn’t really enforce vacancy or blight taxes, and they’re not very high, especially as compared to construction costs. So it’s likely cheaper to just not maintain the building.

LeoMarius

You are just assuming that the building owners won't sell it to developers who will. Why would they bleed money on valuable land?

annang

DC / Crestwood

I’m not assuming anything. They’re literally not doing that, and we are all watching them not do it.

GuyNoirPI

If this was true, developers would be doing that.

Brawldud

DC / Columbia Heights

Developers are making a bet that inaction will be more profitable.

annang

DC / Crestwood

It’s also crazy expensive to borrow money right now. So they may be hoping that interest rates will eventually calm down, and it’ll be cheaper to borrow money to build/redevelop in a few years.

afrosupreme

Alexandria

It's not crazy expensive. It's barely normal. It's just been inexplicably almost free for so long.

EthicalImmorality

The current fed funds rate is 5.33 percent, which means any new commercial loans are going to be at least that (since the bank earns 5.33% doing nothing with the money). The rate has not been that high since 2000. While 5.33 is normal compared to 1970s-90s, it's pretty un-normal for the last 20+ years.

lalalalaasdf

I assume it’s easier and more lucrative to keep them as offices, especially for buildings that will likely have one or two tenants. One embassy or consulate or think tank can occupy the whole building and be a reliable source of income for a decade. I’d imagine the owners of those buildings are also smaller scale and less leveraged (but also have less money on hand) than the owners of the big buildings currently getting converted, and so they have less incentive to sell or undergo a costly conversion.

evolutionista

This is a very frequent topic of conversation around here (both in real life and on this subreddit).

The answer is: these conversions are happening

But it's really difficult due to massive differences in code requirements and preference differences, mainly in 1) routes to egress 2) adding massive amounts of plumbing (do you really want to share a communal bathroom and kitchen with several apartments on your floor? That's currently how offices are laid out) 3) the footprint being incompatible with it being okay to place people in the windowless bowels of an office building but not okay for egress and life enjoyment. You can make really narrow shotgun style apartments but it's not a particularly attractive layout, and even those can't be built more than one "layer" deep, so many of these conversions are focusing on new office buildings in decent shape that can handle so many structural changes, in profitable/desirable locations, and often with large courtyards already present which helps with light/egress requirements that are different for residential.

https://www.bloomberg.com/news/articles/2023-07-06/why-converting-new-york-city-offices-to-apartments-is-so-complex?leadSource=reddit_wall

MeghanClickYourHeels

No no, your links are about office buildings into apartments, which I know is a common discussion.

I’m talking about the townhouses that were initially built as single family homes, were then converted into offices or commercial spaces, and are now sitting vacant.

evolutionista

Yeah my bad for not reading your post before my coffee! I'll leave up my reply so people interested in the general topic can click those links

What you propose makes total sense but it also makes sense those smaller conversions don't go on the news as much so there's less info to work with

I think as long as there's no problems with zone changes it would make complete sense to convert them back

Ok_Culture_3621

Like other people said, it’s a money issue. I would only add the detail that the cost to redesign one of those is difficult to justify unless you could add density. And adding density to most 100+ year old properties in that area would be next to impossible.

CorksAndCardigans

I work in a townhouse in DuPont and we’re selling our building and moving further downtown. Apparently we had an offer to buy immediately but they backed out, allegedly the government said they couldn’t turn them into condos (something about the zoning). No idea how true that is, but that’s what we were told.

celj1234

Bc they are expensive to do. Money is the driver of everything.

lc1138

-1

But surely it’s less expensive to revert a building originally designed to be a home that was converted to an office space to be reverted back to being a residential housing space … in comparison to trying to renovate an office building built to be an office building into apartments

celj1234

Yes but still expensive

Glittering-Cellist34

Bathrooms and kitchens.

lc1138

Given the structure of the building that was originally a house, it would be presumably less expensive to renovate one of these properties into residential spaces than a vacant office building

Glittering-Cellist34

Sure. But it's not as cheap as you think, for the reasons listed. I worked in one of those buildings many years ago...

It would be like a church conversion

lc1138

I see

thelebaron

I personally dont think it would be that onerous to convert homes back to actual homes, I think they are just holding out for commercial renters who probably are far more profitable to have than residential renters.

Its the same like vacant commerical spaces that go for months(or years looking at you klnb) empty, rather than lowering their rates because apparently its better to keep the rents high across the board than to lower some to fill vacancies.

celj1234

Yes that’s apart of the cost

DC-COVID-TRASH

Anacostia

The return for converting a building that would have a handful of units max is close to nothing, if not negative.

coozyorcosie

Maryland

Unfortunately due to building codes they'd need to add a second stairwell to these buildings to turn them into multi unit dwellings, which is prohibitively expensive.

Someone could buy them and convert them back into single family homes, but that's also way more expensive than just buying a single family home.

This video does a good job explaining it.

https://www.youtube.com/watch?v=iRdwXQb7CfM

iamrecoveryatomic

Some of them are pretty large and could easily fit at least 6 apartments, more if you skimp on square footage.

I don't think any old house can be turned into 6 apartments. Office spaces probably have easier requirements than a home, which is why a home could turn into one or more office spaces. But turning a home into 6 apartment units is not feasible, so turning an office converted home into 6 apartment units is still not feasible.

You can probably turn each of those offices back into a single home though. However, there's also code updates that might make it not worth it vs restarting from scratch.

WR1206

Cost of money is very high as are construction costs. I work in downtown commercial real estate. Most projects just don’t pencil out. There also isn’t a huge pool of capable buyers for what you are describing who can actually make it work and have the return fit their investment strategy.

MeghanClickYourHeels

I too work in commercial real estate but not in the development side. That’s…not great news.

Available_Cream2305

It’s mainly because it’s going to be a full gut conversation, the way a commercial space functions is nothing like a home. So all the mechanical, electrical and plumbing will need to be moved/added or completely reconfigured. Full gut renovations are pricey. Which could come to 350-500k worth of renovation (I’m pulling that number from some row-home conversions I did in Georgetown 3 years ago). So not only do you have to buy the property, re-permit it as a residential space, you’ll have to completely gut it to build it into a usable residential space. It’s too pricey for most people.

notevenapro

We just did a medical office build out and it was 7 figures. Super expensive.

LeoMarius

And? Office space isn't coming back, so you either convert now, or lose money and convert later.

Available_Cream2305

Ok and who is doing the conversion? A hopeful homeowner? A developer? Is it worth the time and investment? Many might say, no it’s not.

LeoMarius

Either the landlord does it or sells to someone who will.

BIGGERCat

It’s very expensive. Generally when you see an office to residential conversion it ends up being a fairly high end development which is needed to get high rents to justify the expenses.

Those small buildings you mentioned aren’t going to be able to get the rents of a larger development with a fitness center and other amenities. I’m sure you will see some converted but this is a limiting factor.

FxTree-CR2

DC / Neighborhood

So this is a layered deal.

1 — it’s expensive as fuck and even considering the value of the land, the margin of doing this conversion isn’t wide enough to entice many developers. They’d rather spend less to make more on other projects.

2 — many were converted when they no longer met housing code. Conversion is truly a gut rebuild. This will be more expensive given the difficulty of demolition in high density areas.

3 — utilities serving these buildings aren’t set up for residential. This one is not insurmountable, except sewer in some places.

4 — zoning. This can be changed, but it’s a pain in the ass that contributes to layer one — the margins are too small.

5— it takes longer than most strictly residential projects.

6— may were turned into offices because residential wouldn’t sell.

limited8

LeoMarius

Because it doesn't cost money to maintain near empty buildings with little prospect of becoming profitable again.

annang

DC / Crestwood

No, it really doesn’t cost much if you just don’t do any maintenance.

LeoMarius

-1

Then your investment turns to junk, and the city will condemn it.

annang

DC / Crestwood

And like I said in the other comment you just replied to and downvoted, the city doesn’t really do much about that.

LeoMarius

They are, but it's an expensive project. In the long run, it's the only solution because businesses and government don't really want office space, retail space is surplus, and home prices are still high.

Sunbeamsoffglass

They are but it costs a huge amount of money, time, and permits to do so.

Often cheaper to let it sit and write off the lost income and depreciation for tax reasons.

gfesteves

Can you share the article about 1201 Connecticut? I used to work in that building and I’m curious.

MeghanClickYourHeels

It’s an industry site so there’s a paywall but here: https://www.bisnow.com/washington-dc/news/office/longfellow-building-seeking-residential-conversion-124876

Chuck-you-too

Money. Too expensive.

ElectroAtletico2

Let’s just give it to squatters!

makemeking706

Affordable housing has no value.

AsheAr0w

Issue is money — there needs to be more subsidies and incentives to make the numbers work, because very obviously more housing is better than vacant office space for everyone.

dcgradc

Many townhouses aren't zoned for multi-units .

I turned a huge TH into 4-unit + another TH into 2-unit . Both in 20009 across from Starbucks

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