The high cost of office-to-housing conversions
Bishop Ranch is reimagining its future, transitioning into a mixed-use residential community that will house up to 30,000 residents on its 858 acres of land.
KB Homes isn’t the only homebuilder developing there. Belmont Village Senior Living has opened a senior living complex onsite, and Summerhill Homes is building a single-family home development.
Such conversions are a response to supply and demand. According to the National Association of Realtors, the office vacancy rate reached 13.7% in March 2024.
Meanwhile, Realtor.com reports a housing gap of nearly 4 million homes.
Why aren’t more developers jumping on the office-to-housing bandwagon?
"It’s much easier said than done," Bellasario says, noting that most office buildings don’t have the infrastructure to support residential living.
KB Home’s decision to demolish rather than convert the Bishop Ranch office building speaks to the difficulty of these projects.
A study by San Francisco’s Urban Land Institute and SPUR (San Francisco Bay Area Planning and Urban Research Association) noted that for many builders, the revenue from these conversion projects isn’t worth the development costs.
To encourage more builders to take on office-to-housing conversions, the study recommended San Francisco reduce costs by changing building code requirements and work with state authorities to reduce fees and taxes levied on builders.
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Learn MoreHow the trend might affect property values
The office-to-housing conversion trend can impact your real-estate investments — commercial or residential — for better or worse. Here are some factors that could impact property values:
Changes to zoning bylaws to encourage conversions can change the makeup of your neighborhood, driving property values up — or down.
Overdevelopment could drive property values down if infrastructure doesn’t keep up.
Conversions can revitalize neighborhoods, but a glut in new housing can drive property values down.
If there’s a conversion planned in your community, stay on top of potential impacts by joining a local social media group if your community has one.
Get involved in local planning. Attend public meetings of the planning committee and zoning boards. You can find out when these meetings are scheduled by checking your municipality’s website.
Follow national and local housing reports.
If you’re worried about home values dropping in your neighborhood, consider home renovations. You may be entitled to a tax credit for energy-efficient upgrades.
And to appeal to potential buyers who work remotely instead of in office buildings, a nice home office could make your property stand out in a competitive market.
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