A need for office space in some sections of some cities is leading to new retrofitting activity across the country, says a new comprehensive report just released by the Washington-based Urban Land Institute.
That report, Emerging Trends in Real Estate, contends that increasingly older office space is being converted into residential units, or in some cases even upgraded into modern offices.
This trend, notes the report, has only occurred in places where such projects are actually “supported by the market.”
The report also notes that in many places, office space is frequently upgraded and improved if part of a mixed-use picture that also includes hospitality.
The observations on new uses for office space are part of a handful of insights included in the study, which was done in conjunction with the firm of Pricewaterhouse Coopers.
The study additionally notes that nearly three years after the Covid-19 outbreak, gains for rental property are “moderating as demand returns to more sustainable levels.” Even more, “many indicators suggest that the really good times may be over, at least for a while.”
Not surprisingly, the study contends that both for-sale and rental housing has become unaffordable. Among the reasons for the increase: restrictive zoning and building codes that are limiting new supply.
At the same time, affordable housing transaction have become increasingly complex, requiring more underwriting, with one developer commenting that the average deal used to take 90 days to close, “and now it’s over six months.”
For all of that, investors still like up-market projects, particularly when it comes to the multifamily and industrial sectors. Such niche assets as student housing and family rentals, despite what appears to be a more restrictive economy heading into 2023, remain particularly appealing.
An additional cautionary note: the increasing specter of vacancy taxes. “These taxes can take various forms, but the goal is to increase the effective supply of housing by imposing costs on landlords who keep housing units vacant.”
By Garry Boulard
