California Continues to Eye Conversion of Office Space to Housing
Throughout California office buildings continue to suffer from historically high vacancy rates and the state appears to be redoubling its efforts to tap into these underutilized resources as part of an ambitious plan to increase housing units.
While an overabundance of office space is not unheard of, the velocity at which office vacancies are increasing is troubling. Indeed, in some cases, the rate of tenant departures has resulted in “Zombie” office buildings – where vacancy rates have topped 50% or more.
With the demand for residential housing heating up and political pressure to address housing shortages increasing, many owners/developers are exploring the potential of converting office into multifamily communities. And while there undoubtedly is a societal upside of more affordable housing and sustainable development resulting from conversion – the process itself involves significant economic and legal hurdles.
In a recent article, CGS3 partner Steven Otto discusses the challenges of converting office into residential, including zoning and land use issues in California, as well as recent regulatory changes in the state which expedite the approval for converting commercial properties zoned for retail, office or parking.
The full article can be read in Law360 here (subscriber only).