01 Apr From Commercial to Residential: The cost of conversion
Amidst a housing crisis, Atlanta looks to convert underutilized office spaces to residential units.
As offices across the country remain underutilized since the COVID-19 pandemic, cities look for innovative ways to transform these spaces. Downtown Atlanta is a primary example of this trend. In a study recently released by Central Atlanta Progress (CAP) and the Atlanta Downtown Improvement District (ADID), Downtown Atlanta Commercial-to-Residential Conversion Feasibility Study, Downtown Atlanta was found to have an office vacancy of 5.5 million square feet, or 28%, which has the potential to grow to nearly 40% over the next four years. This vacancy poses significant challenges for the city, not only resulting in a diminished property tax revenue for the city but also impacting the vitality and essence of the downtown area.
Repurposing these commercial spaces to residential uses holds significant promise for revitalizing Downtown Atlanta. This has already been exemplified Downtown, where approximately 20% of the existing housing supply was once office or industrial space. The report highlighted the benefits of this conversion, which included increasing the residential units in Atlanta to address affordable housing in the city, boosting demand for remaining office space, and creating engaging places and street life catalyzed by an increase in residents in the area.
Ultimately, the study found that while conversion is a possibility for some existing office buildings, an increase in incentive tools and public subsidy is needed to make these conversions economically feasible. Recommended incentives included new or expanded funding tools and publicly owned parking while utilizing an RFP process to provide incentives for targeted projects.
KB Advisory Group was recently commissioned by CAP and ADID, long-time clients of the firm, to update a previously executed economic impact analysis. The updated study will further analyze the opportunity cost of inaction discussed in the Downtown Atlanta Commercial-to Residential Conversion Feasibility Study, reporting on the costs associated with not converting commercial-to-residential in Downtown Atlanta. The summary will help to make the case for enhanced public-private partnership tools that might be necessary to catalyze conversion activities, highlighting lost public revenues due to the aging and underperforming office inventory, lost direct and indirect economic benefits, reduction in Downtown’s competitive advantage, and the qualitative opportunity costs.
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To read the full study, Downtown Atlanta Commercial-to-Residential Conversion Feasibility Study, click here.