Mayors call for more office-to-apartment conversions

[jaxlongtimer]

Interesting... more happening here... eventually?  Our players are falling short so far.  I am thinking 11 East and Barnett Bank are the only large scale conversions successfully completed here, to date.  Any others come to mind?

East Coast mayors call for more office-to-apartment conversions

Mayors in cities across the U.S. want to loosen rules that can slow the pace of office-to-residential conversions. In some instances, cities have offered generous tax abatements to developers who build new housing.

"We have a great opportunity to change the uses in the downtown," said Washington, DC, Mayor Muriel Bowser at a December 2022 news conference in support of her housing budget proposals....

....In New York City, a task force of planners assembled by Mayor Eric Adams is studying the effects of zoning changes, and possible abatements for developers who include affordable units in conversions.

Cities like Philadelphia have previously embraced these policies to revitalize their downtowns. In Philadelphia, homeowners and investors received more than $1 billion in tax breaks for their renovation projects....

....Many experts believe local governments will alter zoning laws and building codes to make these conversions easier over the years.

"Our rules are in the way, and we need to fix that," said Dan Garodnick, director of New York City's Department of City Planning.

https://www.cnbc.com/2023/07/15/east-coast-mayors-call-for-more-office-to-apartment-conversions.html

[thelakelander]

Metropolitan Lofts, 112 West Adams, Churchwell Lofts are all early 2000s examples that come to mind.

[Jax_Developer]

Sadly, the economics don't work in Jax without incentives, unless the building is in a unique situation (historic credits come to mind). The office buildings are still worth too much as office buildings to make the acquisition cost make sense. I have intently looked into several buildings, and they are all in submarkets that have low rents psf.

This is a situation though where the argument could be made for incentives to convert them. For example, adding that to the list of CRA benefits or making it city-wide. The gap isn't crazy.

[thelakelander]

Incentives should be provided for just about all types of housing in the Northbank. That's pretty much a given with the current economic condition of the Northbank. With that said, the Metropolitan Lofts is about the only office to residential conversion I can think of that was done without incentives.

[jaxlongtimer]

Two more articles touting the building of more downtown housing as the cure for urban ills using San Francisco as exhibit A:

Diversify or die: San Francisco's downtown is a wake-up call for other cities
https://apnews.com/article/san-francisco-downtown-retail-exodus-6c956f6f219a25aafd292f567a45a302

San Francisco's 'doom loop' is a warning for every American city. Here's how we can fix it — before it's too late.
https://www.businessinsider.com/san-francisco-doom-loop-fix-american-city-housing-transit-2023-7

[thelakelander]

It's very hard to compare Jax with San Francisco. We have +30 years of vacant lots and surface parking lots that could be developed into dense housing and other uses, without even touching our Class A office space. We have more options to address affordable housing than they do. However, incentives are likely needed for most of them still.

[Jax_Developer]

Downtown here will be difficult. Currently there is nothing standing in the way of a DT developer flipping from office to residential.. unlike SF, and most dense cities. They would get all the benefits that any residential project would receive, pending the project size of course. The buildings here are still worth too much as office assets.. unless they are being given away I guess.

I actually think it should be city-wide after thinking about it a few days. Affluent areas with density have office product that is doing quite well (all relative lol).. so would be hard to see that sold for a conversion. Also most office parks are 4-stories and under, and have floor plates that make a conversion impossible. Making it city wide would allow for more projects like the FBI building to move forward. There are buildings scattered around town, in areas that otherwise have little notoriety, that could really benefit from a city-wide bill. I think anything else really limits any real benefit to a handful of buildings in the entire city that could actually be converted due to a wide array of reasons.

Maybe this incentive could stack for the Northbank, instead of it being capped for example. IDK. I still think the true Northbank has to wait for another market cycle for these more intense uses to come in.

[jaxlongtimer]

No surprise... It doesn't look like any new office buildings are ripe for Downtown anytime soon.  It's most likely going to be housing, hotels, retail or entertainment.  FIS might be the last one built for some time and I heard, at least at one point, they were thinking of renting out some of their new space.

Empty office buildings may meet the same fate as zombie shopping malls

....The predicament for office buildings is strikingly similar to that of regional shopping malls around the turn of the century, when Americans first began to gravitate en masse to online shopping, according to an analysis from the Treasury Department's Office of Financial Research....

https://www.cnn.com/2023/12/17/business/stocks-week-ahead-office-buildings-shopping-malls/index.html

[marcuscnelson]

This isn't surprising. I don't think it's a bad thing either. WFH and corporate consolidation mean there's a glut of space, and cities leaning on 9-5 office districts was proving a bad idea, especially with how many larger companies chose suburban campuses anyway. Focusing on making urban centers into real communities provides both the chance for new kinds of office use to take hold and the ability for those communities to stay alive after the end of the workday.

There are still a few potential buildings in the pipeline downtown. The Shipyards office for the Jaguars and AEW, DCPS may still end up choosing a new building, the UF campus will involve some office space for professors and administration. JSO will be looking for new space soon. We're also still coming off a few new office buildings, like FIS as you mentioned, JEA, and JTA.

We're also already seeing a trend of adaptive reuse. Look at VyStar, or the JU Law move. And offices consolidating into newer buildings will mean the chance to improve vacancy rates in those buildings, and potentially adapt older buildings that are better suited for residential into more housing.

[Jax_Developer]

We don't have enough big business to justify any office construction anyways. FIS, CSX, and FNF all have big buildings now (that they all own?). They are really the only players in doing something ground up for office space. It'll take a decade to fill in our vacant space I bet.

[thelakelander]

Not surprising at all. There has not been a market for building office space in downtown since the 1990s. Every blue moon, you'll find a user that wants a space built for themselves, like FIS, but that's not the norm.

[jaxlongtimer]

The Shipyards office for the Jaguars and AEW, DCPS may still end up choosing a new building, the UF campus will involve some office space for professors and administration. JSO will be looking for new space soon. We're also still coming off a few new office buildings, like FIS as you mentioned, JEA, and JTA.

Both JEA and JTA vacated as much or more space in existing buildings so no net gain in office space used there.  FIS may have done some of the same. DCPS should stay put but if they move it is most likely into an existing space.  From what I hear, they really can't justify moving much less building new space.  They surely are not growing their space use, maybe the other way.

JSO appears to be taking excess space from Florida Blue in Brooklyn.  If they move the jail, will they ultimately move their HQ's with it?  That could be anywhere at this point so no guarantee they stay Downtown - and years away, regardless.

The Shipyards office for Khan & Co. also isn't growing office space so much as relocating.  In my mind, this isn't really Downtown anyway, certainly not its core area.

That leaves only UF as a net gain user of office space being "new to town."  If they were smart, they would absorb some of the existing vacanct space but I may be giving them too much credit to do so  .  If they locate at the Fairgrounds, see Khan & Co. above.

Overall, not much, if any, new demand for Downtown space.  Last major absorption was likely Vystar moving its HQ's Downtown and growing their employee base.

FYI, I hear that HD Supply (formerly Interline), a sub of Home Depot, is moving its substantial presence in the tiered green glass "Prudential" building (Prudential already vacated that as well) on the Southbank and in their building on Forsyth/Bay Street near the Convention Center to the burbs in the spring.  That's a few hundred Northbank and Southbank workers moving out of DIA's domain.  More vacant space to fill.

[CityLife]

No surprise... It doesn't look like any new office buildings are ripe for Downtown anytime soon.  It's most likely going to be housing, hotels, retail or entertainment.  FIS might be the last one built for some time and I heard, at least at one point, they were thinking of renting out some space of their new space.

Empty office buildings may meet the same fate as zombie shopping malls

....The predicament for office buildings is strikingly similar to that of regional shopping malls around the turn of the century, when Americans first began to gravitate en masse to online shopping, according to an analysis from the Treasury Department's Office of Financial Research....

https://www.cnn.com/2023/12/17/business/stocks-week-ahead-office-buildings-shopping-malls/index.html

So the author of that graduated from UTEP a couple years ago and likely has no clue what is happening in the real world....

I would take some of it with a grain of salt. There have been changes to the workforce since Covid, but many if not most companies still prefer their employees in the office, at least some of the time. There were some BS articles that came out during Covid saying that employee productivity was up when everyone was working from home during the pandemic, but those were exaggerated and based on wishes, not reality. You will still find some articles from people touting full time WFH productivity, but that does not line up with what is happening in the real world. Yes, some employees are more productive WFH and some professions can do it more easily than others, but overall many corporate leaders and managers strongly prefer some presence in the office.

What Covid did was accelerate something that millennials have been fighting for since entering the workforce 15-20 years ago, and that is more flexibility and work life balance.  A lot of companies are giving their employees freedom to be more flexible with their schedules, WFH a couple days a week, or on the road from vacation; but the reality is that many companies still want their employees in the office for some face to face time. One of the impacts to that new shift is the need for less office space. In the old environment, every employee might have their own office or workstation. Now, some employers are creating open and flexible work spaces, where people do not have their own set space. In these environments, you simply bring your laptop in each day and plug it into a docking station somewhere. If your company or division has 500 employees, you might only need 100 permanent spaces for management, then 300 spaces for everyone else.

I worked for NextEra for a year recently (left because of too much travel), but that is how things worked there. My division of about 500 was about 75% based out of corporate HQ, but the remote workers were generally required to spend a week or so at HQ a month. Most of the workers in the division traveled for work frequently and occasionally worked from home. So the 25% of people that weren't based there never had trouble finding a workstation when they were in town at HQ. And if you did, you could go to a bunch of different co-working type spaces on campus and find a spot to work. I also frequently spent time working from our office in Minneapolis when I was on the road or wanted a working vacation. My colleagues would also work from San Fran, LA, Denver, etc offices based on their regional assignments.

I believe that is one element of the shift that is happening and will continue to happen in the office environment and that is having offices in places where employees want to visit or have a 2nd home in. Because of this dynamic, office is actually still being developed in parts of Florida. I'll share more on this when I get in a minute. 

[CityLife]

Stephen Ross from Related (not the same company doing the Southbank project) is developing office like crazy in Downtown West Palm Beach.

He finished this 300k square foot project in 2021 with heavy hitting financial companies like Goldman Sachs, Elliott Management (new HQ), Point 72 Management



This 270k square foot building will be finished soon and is already pre-leased



These three office towers are planned and I believe construction is imminent

[CityLife]

The last post was just Related projects. These office projects are also under construction in Downtown WPB

97k of office



Mixed-use tower with 200k square feet of office



I'll get to Miami/FTL later