Office-to-Resi Conversion Candidates Scarce in Austin

The office-to-resi conversion trend that swept the country in response to a beleaguered office sector might not be possible in Austin.

The Office of the City Auditor has cast doubt on the feasibility of converting vacant office spaces in Austin into residential units, Austin Monitor reported.

There are few viable candidates for office-to-residential conversion in Austin, partly because many of the buildings that make up the city’s skyline have been constructed in the last 10 to 20 years, the auditor’s office found. Older office buildings are typically best suited for a residential redo. That’s why cities like Dallas and Chicago are at the forefront of this movement.

The audit identified 16 vacant office properties for sale within Austin’s central business district, mostly constructed before 1990, with the majority being smaller than 30,000 square feet. The only office property in Austin that’s been successfully turned into residences is the Brown Building Lofts, converted into 90 units in 2004, the outlet reported.

Such conversions have become increasingly popular in recent years amid the remote-work era, which has driven up office vacancies to historic highs across much of the country, coupled with the need for more housing.

Austin faces a significant housing shortage across all price ranges, while maintaining a persistent office vacancy rate of about 20 percent.

Challenges of converting modern office buildings include centrally located bathrooms, HVAC systems, poor access to sunlight in buildings with large floor plates, and substantial construction debt associated with newer buildings. Zoning presents further complications.

Financial considerations pose a significant hurdle. Adaptive reuse can be more cost-effective than demolition, but to cover redevelopment costs, the resulting units often need to be priced at luxury market rates. An alternative suggested by the auditor’s office is converting office spaces into other commercial uses, such as retail, restaurants or studio spaces, which face fewer regulation barriers.

Mayor Pro-Tem Leslie Pool and Council Member Mackenzie Kelly requested the office-to-resi feasibility audit, which involved consultations with eight city departments, including the Development Services Department and the Housing Department.

Downtown Austin Alliance has launched a space activation initiative to provide vacant ground-level offices or storefronts to artists and musicians for short-term use.

Austin needs more affordable housing near transit corridors, but office-to-resi isn’t the answer, said Hannah Rangel of Downtown Austin Alliance.

“For Austin, we do not think it is a very good fit,” she said. “The downtown core has a very young building stock. When we were talking about some of those vacancies in office buildings, these are big new towers that still have a lot of debt and equity attached to them and business plans and pro formas and also will probably have floor plates that are not really appropriate for conversion.”

—Quinn Donoghue