Not far from the White House, in the heart of Washington, a building that once housed offices used by the US Department of Justice will be converted into housing for hundreds of people.
Last year in the United States, developers multiplied the purchases of hotels and offices in difficulty, deserted by tourists and the millions of employees who remained in telework, to transform them into apartments.
“It’s the market that sets the tone, converting these spaces into housing creates more value than maintaining them as office space,” says Michael Abrams, managing director of Foulger-Pratt, the property development company that transforms the 14-storey building located on New York Avenue into 255 apartments.
A survey by the apartment listing service RentCafe revealed that around 20,100 apartments were created in the United States last year thanks to this type of conversion, almost double the previous year.
And such transformations may well be the way forward to revitalize America’s downtown areas, battered nearly two years into the pandemic. Mr Abrams points out that it is “very expensive” to leave buildings unoccupied.
Their transformation into homes could help alleviate the housing shortage and temper the rise in prices, especially in cities like Washington where rents are high.
“By increasing the supply, the rise in house prices will slow down, rents will fall,” said Lawrence Yun, chief economist of the National Association of Realtors (NAR), the main federation of the sector.
The pandemic plunged the economy into recession in 2020 but sparked an unexpected housing boom as white-collar workers flocked to larger homes, driving up prices.
– Always more expensive –
In 2021, the median price of existing homes continued to rise (15.8%). And, last month, supply hit an all-time low, according to NAR data, likely exacerbating the lack of affordable housing that began before the pandemic.
In 2017, 48% of tenants spent more than 30% of their income paying rent, a figure that had already increased by 6% in the previous 16 years, according to government data.
The United States is full of offices, many of which date from the 1980s and are now too old to attract businesses, observes Tracy Hadden Loh at Brookings Metro. They were designed according to needs that have now disappeared, such as space for filing cabinets, she said in an interview with AFP. “The whole building is obsolete.”
Marc Ehrlich, chief investment officer at Rose Associates, which has converted New York offices into housing, believes these projects tend to be “well-located properties that need better utilization.”
One of his company’s latest projects is transforming an office once used by telecommunications company AT&T into a living space.
As the building lacks services like covered parking, it is unlikely to attract commercial tenants, Ehrlich notes. However, the new apartments will include coworking spaces, as he expects many tenants to continue working from home.
In Washington, developers are flocking to properties once leased by the region’s largest employer, the federal government, including The Wray, a building once used by the State Department.
The only traces of its former use are in the lobby, where the tiles are original, as is a directory listing the names of State Department offices.
In these converted homes, rents tend to be high, Ms Loh said, because they often require expensive renovations such as building new bathrooms.
While increasing supply eases price pressure elsewhere in the housing market, “it’s not a solution to the housing crisis,” she continues. Rather, she sees it as “a solution to revitalize areas like city centers” where offices are now ultra-dominant.