Arduous rezoning processes stand in the way of SJ office space conversions
If San Jose truly wants to dent our historically high office vacancies, we should reevaluate land use requirements to make changeovers cost- and time-effective. Business Insider contributor Emil Skandul's suggestions to streamline office-to-housing conversions, below.
The solution to the office-housing conundrum seems obvious: Turn commercial spaces like offices into housing. Empty offices can become apartments to ease housing pressure while also bringing more people back to downtown areas. But after two years, few buildings have been converted. Jessica Morin, the head of US office research at the commercial real-estate firm CBRE Group Inc., said there hasn't been a "noticeable increase" in conversions. Since 2016, only 112 commercial office spaces in the US have been converted, while 85 projects are underway or have been announced, according to CBRE's data. Despite the promise of new housing — one recent study in Los Angeles estimated that 72,000 new homes could be built in the city by converting offices and hotels — progress has been slow.
So what's going on? Simply: The costs to convert are often hard for developers to justify....
Another barrier for office-to-residential conversions is local housing rules. To turn commercial buildings into housing, they would have to be rezoned — which requires input from community members and local officials — to meet specific requirements. Codes for everything from lighting to sustainability vary by city, presenting irregular hurdles in project costs and timelines. Housing developers may not want to put themselves in precarious political situations or go through resource-draining approval processes for a high-risk project with potentially significant financial downside....
To avoid a commercial real-estate apocalypse, cities will need to streamline conversions. There are several ways to do this. California has set aside $400 million for adaptive-reuse-incentive grants. New York state approved a $100 million fund for hotel conversions, but the stringent requirements led to only a single developer applicant.
Most impactful on the city level would be land-use planning processes that could help speed up conversions. Laws like the Adaptive Reuse Ordinance that Los Angeles passed in 1999 could help dispense with some of the more onerous city-code hurdles, like parking requirements. Gupta suggested that cities could also adapt their tax codes to make conversions more economically feasible by moving to a land-value tax or something similar. Federal initiatives could provide tax credits to developers to ensure buildings are readapted and could provide support for city planners to assist with redevelopment projects.
This article originally appeared in the Business Insider. Read the whole thing here.
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