When Gensler got serious about office-to-residential conversions, it was 2019.
The architecture firm took on a job in the Canadian city of Calgary. More than one-third of the office buildings there stood vacant, and the city was desperate for a solution.
Gensler’s task: Evaluate assets for residential conversion on a tight budget and timeframe. The solution: Build an algorithm to speed the process.
Ultimately, the firm evaluated 3.2 million square feet of office space across 28 buildings and found up to 12 that could fit the bill. The numbers came in as office markets were entering critical condition.
Gensler’s algorithm rapidly became one of the most talked-about tools in real estate.
“Never in our wildest imagination did we think this would become such the predominant focus of the real estate industry,” said Gensler’s Robert Fuller, a New York-based architect leading the firm’s residential practice.
“Right time, right place,” he added.
Gensler’s algorithm didn’t just drop at an opportune time. It blew the lid off a development niche, spilling secrets known by a select few, newly in high demand — like Metro Loft’s Nathan Berman, whose name is seemingly on every conversion project in New York City.
Innovation often foretells obsolescence. If tech can do it better, why risk human error?
But Gensler’s algorithm hasn’t shoved out the old guard. Instead, it has supplied industry veterans such as Berman with a new tool for a decades-old toolbox. The two are partnering on the conversion of Midtown’s Pfizer building, the largest such project to date.
Instead, the algorithm may democratize the knowledge it takes to kick off conversions at a time when developers and cities are chomping at the bit to find new uses for the deteriorating assets. At the least, it figures to grow the market.
It’s still too soon to tell whether conversions will revolutionize cities or developers’ businesses. But if the space explodes, Gensler’s algo could give conversion newbs a way in and a leg up.
“It’s a way of seeing buildings differently,” said Forge Development’s Richard Hannum of the product. The architect-turned-developer is working with Gensler on the conversion of San Francisco’s 785 Market, which he hopes will set the standard for future projects in the city.
“It’s considering all of the parameters that are very, very difficult for people to get their arms around,” he added.
New scorecard
For all the hubbub around Gensler’s tool — and there has been a lot; Gensler was named one of the world’s most innovative companies of 2024 by Fast Company — the product itself is straightforward. Gensler wanted to build “an algorithm that could tell the difference between a building that was going to work and one that wasn’t,” as principal Steven Paynter phrased it on an episode of The Real Deal’s podcast “Deconstruct.”
The conversion scorecard, as Gensler architects call it internally, analyzes 100 data points for each building, drawing on existing plans where possible. Then it spits out a compatibility score that analyzes five criteria: site context or walkability and proximity to public transit; building shape; floor plate size; envelope, which considers whether windows open; and servicing, which evaluates on-site parking, for example.
“People were saying, they don’t really work, we’ve looked at them, they cost too much money.”
A score of 80 percent or above checks every box, and 70 percent could work if a developer is willing to make some design compromises. Below 60 percent isn’t infeasible, but those buildings “might not be the ones you want to focus your attention on,” Fuller said.
Since Calgary, Gensler has tapped the tool to analyze over 1,300 buildings in 130 cities. About 30 percent make sense for conversion.
Does real estate consider that speed and scope an industry game changer?
“Sure, absolutely,” Hannum said.
No panacea
But the algorithm is also a blunt instrument. There are key variables missing from the checklist. A project’s financials are the most glaring.
“Our tool doesn’t assess that,” Fuller said, adding that the firm will manually overlay zoning requirements for clients, as the algorithm was built to be location-agnostic.
Developers are in the business of making money, so conversions don’t work if they don’t pencil. Purchase price, construction costs and financing all weigh heavily on feasibility, whatever the score.
“On one hand you have, yes, it matches the patterns that would allow you to efficiently make a building into housing,” Hannum said. “But then you have to actually cause it to occur, and to do that you have to finance it.”
That’s where the humans come in.
Berman has spent the past 30 years assessing and completing conversion projects and is the type of partner who can fill in the algorithm’s gaps with experience.
“It comes down to what basis you buy it for and how much it costs you to do that conversion,” said Joey Chilelli of Vanbarton Group, which partnered with Gensler on the recent residential conversion of FiDi’s Pearl House.
Berman was unavailable to be interviewed for this story, and understandably so; he is currently in very high demand.
“He’s the guy in New York, right?” Fuller said. “He doesn’t really rely on data; he goes on his instincts and experience, which is significant.”
That deep knowledge allows for more creativity: “How to get every ounce of efficiency out of a floor plate” in the case of the Pfizer Building, Fuller said.
Can-do
If data and experience are key to conversions, the third ingredient is moxie, something the Pfizer partners share.
Gensler built its algorithm, in part, to scrutinize the prevailing sentiment around conversions.
“People were saying they don’t really work, we’ve looked at them, they cost too much money,” Paynter said on “Deconstruct.”
The firm knew it could be done. Berman’s work in FiDi was one example. And Gensler had previously teamed with PMC Property Group to redevelop Franklin Tower in Philadelphia.
Gensler had additional reason to prove out conversions. The firm specializes in zero-net-carbon architecture, and adaptive reuse projects cut back on embodied carbon or the carbon emitted by new construction.
“They see the big picture,” Chilelli said. “Not many architecture firms, I think, are able to do that.”
Optimism is the going outlook among conversion converts.
Berman, likewise, is “not scared of” conversions, Fuller said.
“I’ve literally had a building where one developer is like, ‘No way, this will never work,’” Fuller added. “Nathan looks at it right away and sees a path.”
Breaking ground
Other architecture firms rely on data, but Gensler’s scorecard is so far singular.
Fuller was reticent to label the algorithm a game changer — ”I never liked that term” — but he did note the product’s widespread use.
And that is likely to be the larger impact.
For the developers who can’t nab a Berman for their conversion partner, Gensler’s tool can at least offer an assessment of what assets in their portfolio may be candidates.
As more office buildings fall into distress and innovative owners consider conversion as a lifeline, it’s possible Gensler’s algorithm won’t just be a tool for clients but also a template for other architecture firms developing similar services, and maybe even an invitation for other enterprising companies to find a niche in the office-to-resi world.
“We will see more and more and more of this,” Hannum said.