As Marni Lefkowitz Ahram, a principal at the law firm of Shapiro, Lifschitz & Schram reported recently in Multi-Housing News, “Small and mid-sized urban and near-in suburban markets have experienced residential conversion trends a few times over the past 40-plus years, for instance, by repurposing empty waterfront or agricultural warehouses into loft-style living and entertainment districts, and by leveraging incentives for maintaining historically significant structures that are otherwise outmoded office buildings.”
IREM® President-elect Renee Savage, CPM®, CCIM, agrees. Even in her home base of San Diego, she says, office-to-multifamily conversions have been making local news for more than a decade, with a prime focus on class B and C office assets.
But note, she said “local news.” If COVID-19 didn’t launch the trend, it certainly brought it into the national consciousness. “With the pandemic, there was so much discussion about what would happen to office assets,” says the president of SavageCRE. “Certainly, the news media picked up on it, although they were never interested in it in the past.” Names such as Silverstein Properties and Cooper Carry brought the trend to national prominence.
Indeed, conversions are picking up, with CNBC stating that conversions are “soaring.” The news outlet says that, of 32,000 apartment conversions in the past two years, 40 percent are from office assets.
The economic benefits of turning a lackluster building into a moneymaker are clear, especially given the ongoing shortage of housing, says Savage. But there are other benefits as well. “It’s good for sustainability,” she says. “You’re not tearing something down and rebuilding. Also, considering that there’s not a lot of available land on which to build, this is a great solution for increasing our housing stock.”
How long-lasting the conversion trend might be is a matter of conjecture. But as long as the option seems viable, conversions of all sorts will continue.
Savage cites the conversion of a small office building in San Diego that’s currently being transformed into 27 micro units. But it should be noted that the real news here might be what’s happening across the street, at the seven-acre Horton Plaza Mall, a local outdoor shopping venue that totally fits the lackluster description. Ironically, rather than an office-to-residential switch, it’ll be converted to The Campus at Horton, an “innovation hub," focusing on technology and biotech companies.
No matter the plan, the conversion trend fits comfortably into IREM’s wheelhouse and the support it can extend to members dealing with the movement. On one hand, as Savage points out, “Many property managers are well-versed in only one product type. So, they’ll need to enhance their education in whichever piece they don’t know, whether it’s retail, office or multifamily.”
Ongoing education is becoming ever more critical, she adds, as an increasing number of property management companies and service providers expand their management offerings for greater diversification. “They’ll have to build teams that can speak to more than one area of expertise,” she says.
Whatever the driver, IREM is on hand to support that continuing education initiative. As Savage explains, it begins with the firm foundation of CPM® certification. “From there, you can pick what direction you want to go. We also offer one-off skill badges to round out professional training.”
But another essential service the Institute offers is “the ability to customize training programs,” specifically for the needs of the member organization looking to expand. This is another trend we’re seeing in real estate management, and IREM has the talent and expertise to fulfill that demand.