- [Narrator] For nearly 50 years,
this lower Manhattan skyscraper
was an office building,
but in a few months it will reopen
as a luxury apartment complex with 588 units.
But unlike this building,
1 billion square feet of office space
still sits vacant across the country.
That's about 370 Empire State buildings.
Converting all this empty space to housing,
might seem like a straightforward solution
to the country's Housing Shortage.
But transforming office buildings
isn't simple or cheap.
- It's like a putting a puzzle together.
- [Narrator] We'll explore what it actually
takes to convert an office into housing.
And if that could be a solution for the vast amounts
of empty real estate becoming a crisis
for cities around the country.
Let's head back to 160 Water Street
located in the heart of Manhattan's Financial District.
Once completed, the building's lobby
will transform from this, to this.
Developers say these types of conversions,
can cost as much as $500 per square foot.
Six new floors are also being added
to the 24 story structure,
including 500,000 square feet
of apartments and amenity space.
In many cities, zoning laws
can prevent conversions like this one
from happening all together.
- The city might say,
well we don't want residential buildings in that district.
That's our office district,
we're trying to preserve jobs
and therefore we're not going to
give you the zoning permits that you need
to do the conversion.
- [Narrator] And even with the right zoning
other design challenges can get in the way.
That's because many office buildings
are laid out differently than residential spaces.
They might have structural columns every 30 feet
which can make it difficult to install plumbing
or there might be windows that don't open.
Developers say converting older buildings,
tends to be much easier.
- When you think about how the design
of office building evolved during the 20th century,
in the early part of the century
you had much smaller buildings.
They weren't as wide.
- In the days before air conditioning,
Offices needed functioning windows
for ventilation on hot days
and to light up workspaces.
These types of buildings
tend to have a similar design,
a slim shape, narrow floor plan,
and punched in windows.
Looking up from the sidewalk,
here's one in New York
and another in Chicago.
Developers for say these floor plans
translate well to apartments
because interior spaces
tend to be no more than 30 feet
from a window that opens.
- And with that, it actually helps out
so that the units can be laid out
with the proper light and air.
- [Narrator] Joey Chilelli,
is managing director of Vanbarton Group
the developer of 160 Water Street.
The building conversion we saw earlier,
the office first opened in the 1970s.
Postwar buildings like this one
can be harder to convert to housing.
- After World War II and the modernization
of office building construction.
You had air conditioning,
you had fluorescent lighting
so you could get much bigger floors,
and so you wouldn't have the same access to light
and air that you had in an apartment building
or in the older office buildings.
But they were much more efficient for landlords
and much more efficient for tenants.
- [Narrator] But developers and architects
say that setup isn't ideal for apartment living.
- If you think about a floor that big
how could you carve that up into apartments?
You'd have to have some very, very narrow apartments
or you'd have to have apartments in the middle
which who'd wanna live there,
who'd wanna live in the middle of a big floor plate
with no windows.
- [Narrator] You can see the differences
when comparing the floor plans of 160 Water Street
to this pre-war skyscraper example.
For perspective, here's what a
600 square foot apartment looks like in both buildings.
As you can see larger floor plans
can make it difficult to construct apartments
with enough access to light and air.
To solve for this, the developers
at 160 Water Street are scoping out three shafts
from the center of the building.
- The floor plate depth
was actually a little too deep
so we cut out a series of three shafts.
We took that square footage,
and then we reallocated it,
into other areas of the building
where it would be usable square footage
and rentable square footage.
- To account for the additional floors,
the structure is being reinforced
with steel plates on each column,
beams and diagonal bracing.
It's also getting larger windows that open.
Other buildings with large floor plates
may take a slightly different approach.
Like this building right next door,
180 water street.
- You cut out the floor and create a light well
to get lightened air on the inside.
- [Narrator] That means more Apartments can be constructed
in the center of the building,
including studios with windows facing into the courtyard.
For 160 Water Street the changes resulted
in almost 600 apartments,
with rents ranging from $3,500 up to $7,500.
Despite the lack of affordable housing in Manhattan
many conversions create market rate luxury rentals.
According to developers,
that's because it's hard to cover the costs of conversion
while producing affordable housing
for lower income residents.
- These projects are very expensive
and they just don't pencil out
without some kind of tax benefits.
What happens in a lot of cities
as a requirement for developers
to get those subsidies and incentives,
they have to provide a certain amount of affordable units.
- [Narrator] In Chicago, the city is using a mix
of tax incentives and public funding
to help finance several office conversions,
in a vacant business district.
All told the plan would lead to about
1600 new apartments, 600 of them affordable.
Lawmakers in cities like San Francisco and Washington DC
are exploring similar plans to add housing
and revitalize their office districts.
Still initiatives like these only address
a fraction of the country's affordable housing needs.
In 2021, the US faced a deficit of more than
7.3 million Affordable homes for low income renters,
according to the National Low Income Housing Coalition.
Despite the challenges, there are more
than 2,600 office buildings across the US,
that developers might view as candidates
for residential conversion.
According to real estate analytics firm CoStar,
to help make converting Offices more cost effective,
developers say cities could create more economic incentives
like tax abatements and subsidy programs.
- Some cities are getting so upset
about the economic impact of empty office space
is that they are providing incentives more and more.
- We must make it easier
to convert office buildings.
- [Narrator] In New York,
mayor Eric Adams proposed extending the relaxed zoning rules
that made 160 Water Street possible.
Changes like these could help
increase the rate of office conversions,
which have seen an uptick in recent years.
In 2020 and 2021 alone,
more than 11,000 apartments
were created in buildings that once housed offices,
a 43% increase from pre pandemic levels.
That's according to a recent study
by real estate research firm, RentCafe.
Conversions may also become easier
as market factors push developers
to sell their least profitable office buildings
at steep discounts.
- Sellers have this idea in their heads
about what their buildings are worth,
and they don't want to sell it for
20%, 30%, 40%, 50% lower than that,
but that's starting to happen.
They have to pay the mortgage,
their creditors are getting involved
and once that begins to happen,
then more and more of these projects can take place.
(bright music)