Conversion to multifamily housing is beginning to deplete office inventory in Dallas’ central business district, with more than 2 million SFs of vacant space coming off the market in the coming months.
Ongoing projects include planned conversions Bryan Tower, Renaissance Tower, Energy Plaza, Santander Tower, 501 Elm Place. Collectively, these projects will reduce his CBD office vacancy rate from 31.6% to 6.5%. JLL.
Adaptive reuse Projects to convert office space into residences are nothing new, but experts say timely factors are layered behind the surge Dallas’ CBD is experiencing today.
Courtesy of Woods Capital
The Bryan Tower project will add hundreds of new apartments downtown.
A deliberate effort by city officials and stakeholders to create a more walkable and livable downtown has led to an influx of housing developments, part of the purpose of which has been lost valuable traffic for years. to support retailers who have been
At the same time, the right-sizing of companies and the widespread shift to hybrid work have reduced the need for certain types of office products, creating a serendipitous opportunity to solve two problems at once.
“If you look at the spaces that have been vacant for the longest time, they are older and a little dated,” said JLL Managing Director. Tory Littlejohn Said. “I think being able to convert them into apartments is a win-win.”
Dallas isn’t the only city where changes in the office market and tight housing supply are creating strong demand for conversion. in New York’s financial district silverstein properties metro loft Turn 55 Broad Street.a largely vacant office building into over 500 apartments.
Six office-to-residential developments have begun in Washington DC in the past two years. Chicago officials recently announced plans to offer incentives to developers to revitalize iconic locations in the city. Lasalle street,in short Handles 5M SF of vacant commercial space.
Since its launch in 2020, adaptive reuse projects nationwide have delivered about 32,000 new apartments, according to RentCafe. In 2021, about 7,400 apartments will be created by office conversions.
Despite their growing popularity, some submarkets are better suited to conversion than others.
Dallas’ CBD is dominated by towers built in the 1970s and 80s, and office development has exploded, with newer buildings often exceeding 1M SF.
The size and age of these buildings make them nearly impossible to compete with newer properties, especially as companies prioritize quality above all else.
“If you look at the absorption rate over the last few years, almost all of it is in buildings built after 2015,” says Littlejohn. “There aren’t many buildings downtown that were built after 2015.”
Dallas CBD has more than 27 million SF of rentable offices, of which 4.7 million SF are classified as Class B.is more than 26% of Class B products The third quarter was vacant, according to the company. CBRE.
There is also 213K SF of Class C inventory in this area. Merriman Anderson Architects principal and team leader Jennifer Pique-Reyes Especially good for conversions. Low ceiling heights and other architectural features common in older buildings tend to be easier to improve when converted to housing, she said.
Courtesy of Lisa Petrol
Statler was renovated in 2017 and now includes over 200 luxury rental apartments.
“Historically, we have had a lot of Class C office space. [in the CBD] It doesn’t really translate well to Class A, but it translates very well to a home or a hotel,” said Picquet-Reyes.
woods capital is transforming two office buildings downtown. The first, the Santander Tower, is a 50-story, 1.4M SF skyscraper from the 1970s, and the second, the Bryan Tower, is a 40-story, 1.1M SF structure from the 1980s.
Together, these projects will add nearly 600 homes to the CBD.
Billy PrewittWoods Capital’s executive vice president and chief investment officer (CIO) said the towers have continued vacancies and are good candidates for conversion.
At the same time, it’s a tower so huge that it doesn’t make sense to turn the whole building into an apartment, increasing the need for different uses. Some office space, hotels and retail space will be preserved.
“If we were to convert all of Bryan Tower, it would be about 800 units,” says Prewitt. “The conventional wisdom in the multifamily world is that 800 units will never reach full occupancy.”
Energy Plaza is another office building from the 1980s that Todd Interest, a commercial real estate firm, has converted a sprawling vacant space into apartments.
The driving force behind the project is the desire to attract more residents to the city center. Patrick Todd He said his team’s unwavering confidence in the CBD office market was just as big a factor.
“We’re speculating on a half-million-square-foot office, which speaks to our belief in what the demand for offices is,” he said. I really believe in both.”
Woods Capital also believes the office market will continue to thrive, but Prewitt said absorption has slowed as leasing progresses and tenants are appropriately sized. The amount of office space in Santander Tower and Bryan Tower has been adjusted and upgraded to reflect that change, he said.
Courtesy of Todd Interest
Energy Plaza will include a combination of high-end office space and apartments.
“We don’t necessarily see occupancy rates for quality office buildings going backwards. We’re seeing them moving forward, but slowly,” he said. “For us, this was an opportunity to move things forward faster.”
According to Todd and Prewitt, the growing popularity of conversions is also due to relatively fast delivery and reduced risk.
Banks are more comfortable undertaking multi-family housing projects than offices. At the same time, developers can often avoid many of the headaches associated with developing from scratch, such as qualification hurdles and concerns about building material costs and lead times.
“We go with the ones that don’t have that risk and that allow us to shorten the construction timeline significantly,” says Todd. “It turns out that lenders are generally happy to undertake.”
Not all office buildings can be converted into apartments, but developers can breathe new life into abandoned buildings when the repurposing makes sense.
For the Dallas CBD, transforming the office towers will honor downtown’s history while ushering in a new era of vitality, said Merriman Anderson Architects president. Milton Anderson Said.
“We are not demolishing many beautiful old buildings,” he said. “They have great bones, they have a great history, so reusing them just spurs growth to the next level.”