One of the biggest buzz phrases in real estate development currently is office-to-residential conversions, and, with a pipeline growth of more than 350% nationwide since 2020, it’s easy to understand why. Based on a study done earlier this year by RentCafe, these conversions make up 38% of assets being converted into apartment units for 2024, with Phoenix in the top 10 for metro areas leading the charge. While this growth is impressive, and is certainly garnering conversation, it’s important to note that this segment is still small in the overall residential housing market. Adaptive reuse projects can be daunting and take an experienced team and the right combination of financials to make them viable, leading many clients to ask the following questions: why and how?
In regard to the “why,” we see an influx of conversion properties anytime there is a major cultural shift that puts supply and demand greatly out of balance. In this case, there currently is a large supply of vacant office buildings and, in some markets, a low supply of rental units. Other types of buildings being converted into residential units include hotels, factories, healthcare buildings, malls and churches, but, as previously mentioned, offices make up 38%, due to the supply in the top conversion markets.
The “how” is a harder question to answer for many, and the main concern is it has to make financial sense. In addition to that, building size, open floorplans, parking, number of elevators and column distance are all factors on how the building will function. While these are all important logistics, from an interior designer’s perspective, the biggest task is how it will sell and generate the maximum return on investment. Unit layouts and schematics are the major factors, but equally important and often overlooked is the concept of placemaking.
Placemaking is historically used in reference to urban planning and the importance of public space within a greater community. However, we have seen that it’s also an important concept to keep in mind when designing a multifamily property, which is essentially its own smaller community. Creating positive engagement that sparks public discourse and improves the health, safety and quality of life of the residents is a contributing factor in signed leases and brand loyalty. In a world of increasing digital interaction, authentic analog relationships can transform how we feel and connect to a property.
In conversion properties, placemaking is even more crucial. These conversions, by definition, are disruptors, intended to change the status quo, and when done well their spaces and impressions reflect that. Walking through a building before it is converted is truly a case of “the lights are on, but no one is home.” It’s a space, but not a place. In a study released in November of 2022, The Creative School at Toronto Metropolitan University found crucial evidence of the effect of placemaking on ROI. These placemaking studies were mainly in relation to city initiatives, but the mindset is the same, and can and should be applied to multifamily communities. The study found that people were 50% more likely to spend time in places with public art, had a 63% increase in positive feelings toward locations when placemaking elements were introduced, and a 74% increased likelihood to share information about the location by word-of-mouth or social media — all of which can increase foot traffic and exposure. Many of these vacant buildings have had a negative or at least ambivalent effect on their surrounding neighborhoods, and it’s essential to reinforce that the property is undergoing a transformation that will have a positive and lasting impact.
Christina Johnson is creative director of Phoenix- and San Francisco-based Private Label International, a full-service interior design studio that develops hospitality environments and lifestyle brand experiences for clients worldwide.
Photos courtesy of Private Label International
