Originally published on October 20, 2023, by Logan Nagel for NAIOP.
Low occupancy across the office sector as well as high demand for housing has many real estate development professionals asking whether adaptive reuse of commercial buildings may be an option to add supply during the housing crisis. A NAIOP CRE.Converge conference panel in Seattle this week investigated that very question, focusing on a successful conversion case study in Alexandria, Virginia, as well as exploring what it takes to get conversion projects across the finish line.
Completed in 2020, The Foundry transformed an underutilized federal office building into a mixed-use residential property. It sold in 2021 for $262 million, after the developer paid $50 million for the property and $150 million in construction, design, and carrying cost. The sale was CoStar’s 2021 Deal of the Year. Office conversions give developers a number of benefits: they can provide opportunities in attractive markets with limited available open space while saving time and money compared to ground-up construction. At the same time, they also present their own challenges, particularly around layout and structural considerations.