"No Demand" — Big Cities Can't Replace Offices with Apartments

With demand for office space in many big cities—from Melbourne to New York City to London—at significant lows, some housing advocates push to turn empty office space into residential apartments. Office vacancy rates in New York City reached 13.2% in March.

Economists and architects cite problems with this proposal.

Economists claim lockdowns and mass migrations of people from big cities, particularly the loss of many foreign nationals and international students, inroad the demand that justifies office space conversions.

"There's definitely not a high demand for apartment living in the city at the moment. We've lost international students. We've lost immigration, obviously. So there's actually not a demand. You could convert them, but I don't know who would be moving in," reported Hodyl and Co-managing director Leanne Hodyl, a consultant working on the problem.

Hodyl points to one single-bedroom apartment recently sold in New York City for 30% less than the owner's price fifteen years ago.

Architects and city planners cite different issues with the proposal; retrofitting the buildings requires more than stripping out office walls and installing apartments.

"If you were to refit, things like ceiling heights and plumbing add a lot of cost. The expense comes from having to retrofit the entire building," said city executive director Danni Hunter. The large footprints of offices also mean that it would be hard to get natural light into every apartment in a large office building, creating apartments with no windows.

"You can pretty easily convert hotels and student accommodation into longer-term apartments, but I'm not very excited by it as a solution because we don't actually have really high vacancy rates for residential in the city," Ms. Hodyl said.

Urban designer Andy Fergus said relaxed rules in London that have allowed commercial sites to transform into residential spaces with few restrictions have led to poor outcomes for occupants. "If they were to be assessed against residential dwelling standards, there is no office building built in recent history that could be converted into an acceptable standard of apartment because the floor plans are too deep to achieve an acceptable standard for living. Research has shown that this experiment in deregulation has yielded neither affordability nor acceptable standards of living."

At least for the time being, it appears that repurposing office space as apartments will not solve any problems, no matter how good the plan looks in theory.

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