Laws Pave Way for More Residential Development
Recent California legislation is attempting to accelerate and facilitate, statewide, the national trend of converting commercial real estate into residential use.
Whether in Chicago, New York or elsewhere in the country, housing shortages (affordable and market) have soared due to increasing demand — including from institutional investors. That surging demand has driven the cost of housing beyond the financial means of many individuals.
While the inventory of available housing has been shrinking, evolutions in modern lifestyles have aligned to create challenges in the commercial real estate industry, resulting in decreasing demand for many office and retail projects. Remote work-from-home business models have increased the amount of online shopping, exacerbating the impact on shopping centers, while also reducing the demand for office space. As these issues continue to persist, the conversion of failed or underutilized office and retail properties into residential projects has gained momentum. Nationwide, cities are working to transform vacant and underutilized commercial space into much needed housing.
In California, in an effort to accelerate such conversions, Governor Gavin Newsom recently signed two new laws designed to facilitate such commercial to residential conversions.
Steven Otto, partner at CGS3, has provided an in-depth analysis breaking down the long term and short-term effects of the new law. The full article can be read in The Daily Transcript and the Daily Journal (subscription required).