Columbia, NYU identify office-to-resi candidates in Texas

The top candidates for office-to-residential conversions have emerged across the Texas triangle.

In Dallas-Fort Worth, there are 80 office properties, totalling 8.4 million square feet, suitable for residential reuse. There are 44 such properties (4.2 million square feet) in Houston-Sugar Land-Baytown and 40 (2.1 million square feet) in Austin-Round Rock, according to a study by the National Bureau of Economic Research, which was compiled by researchers from New York University and Columbia University.

Office-to-resi conversions have become a hot topic as lingering remote-work trends and high interest rates continue to crush office real estate across much of the nation, and landlords are exploring ways to repurpose their assets. 

Turning an office building into apartments is often the preferred choice, especially in major Texas markets where multifamily demand is strong and rents have soared since pre-pandemic days. 

However, residential conversions can be difficult to pull off. They can be incredibly expensive, and sometimes, infrastructure prevents them. Plus, they often require zoning or building code adjustments, and developers are often looking for property tax abatements and other public funding.

Nonetheless, office-to-resi projects can mitigate an oversupply of office buildings, alleviate housing shortages and help meet climate goals, as rehabbing existing buildings produces 50 to 75 percent less carbon emission than new construction, according to the report.

To determine viable candidates, researchers pinpointed properties with the physical attributes that would allow for a residential conversion. For instance, older office buildings with relatively narrow floor plates are considerably easier to repurpose than newer buildings with floor plates that are too deep for conventional apartments. 

In Dallas-Fort Worth, some options include the 35-story tower at 500 Throckmorton Street in Fort Worth, as well as the Adolphus Tower and St. Paul Place in downtown Dallas, the Dallas Morning News reported. The historic high-rise at 211 North Ervay Street was also listed as a prime candidate, but Wolfe Investments is already planning on repurposing that one. 

While there are over 160 office properties suited for a conversion between DFW, Houston and Austin metros, the financial feasibility of redeveloping them for residential use is questionable. Factors such as declines in office values, average residential rental rates and construction costs were analyzed to determine this aspect. 

The study ultimately found that widespread office-to-resi conversions make financial sense in Dallas and six other U.S. metros: New York, San Francisco, San Jose, Boston, Washington, D.C., and Denver.

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