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3 challenges that may arise when converting office space to residential units

On Behalf of | Jan 15, 2024 | Real Estate |

Commercial real estate has long been one of the most stable and lucrative investments available. However, changes in the economy have altered the returns on what were once straightforward, easy-to-predict investments. Office space, for example, has seen higher vacancy rates in recent years after work-from-home initiatives gained significant momentum.

Those invested in commercial real estate may hold many unoccupied units and might worry about how they could recoup what they have invested in those properties. One of the options could involve reworking existing facilities to use them for another purpose with higher demand and bigger profit margins. Converting vacant office space to residential units, such as condominiums or apartments, might be a savvy move. However, property owners and real estate developers need to prepare for certain unique challenges that come with renovating an existing facility to use it for another purpose.

Zoning issues

A commercial property has vastly different zoning than residential spaces. The business hoping to convert an office building into an apartment building or condominium complex first needs to address any zoning issues with the property. In some cases, permanently changing the zoning for the property could be an option. Other times, a variance could be a viable solution. Addressing zoning matters typically needs to occur early in the project to ensure it is a realistic idea.

Massive system overhauls

In theory, office buildings have all of the basic systems required to sustain human comfort. However, maintaining individual dwelling units is vastly different than providing a workspace. From the number of electrical outlets and bathrooms to the installation of separate HVAC systems, there can be a lot of systems investments required to turn an office building into a space where multiple different people can comfortably live.

Getting ahead of trends

Those trying to break into the residential real estate market often hope to receive a sizable return on the investment made. Attracting high-end tenants or owners usually means appealing to their aesthetic sensibilities. Massive remodeling projects may take years to complete. The finishing touches and amenities that are trending now could shift dramatically in the next few years. It can be a challenge to get ahead of housing and interior trends and to make the units attractive enough to rent or sell them all quickly after converting them.

Property owners and real estate developers who understand the challenges inherent in switching a property over to a different use may be able to better evaluate whether a project is realistic and improve their chances of successfully and profitably completing renovations.


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