WHITE TIGER CONDO CONVERSION
"Work is on the brink of a revolution ~ we need office buildings to match."
— World Economic Forum
MULTIFAMILY - OFFICE - RETAIL
Commercial buildings — including existing high-rise office buildings, smaller professional office buildings, and mixed-use buildings, retail buildings and strips, and other types of buildings— are in increased demand and excellent candidates for condo conversion as individual office units.
Adaptive reuse or conversion than constructing a brand new one from scratch is often shown to be more cost-effective and profitable — in addition, to saving the time required for acquisition and public evaluations. Conversion makes economic sense for building owners for a number of reasons. First, they can save on the cost of maintaining, upgrading, and paying taxes on their property. Second, they can realize an immediate profit and multiply the value of their holdings. And third, conversion frees them from the obligation of marketing and managing the properties, negotiating leases, and other owner responsibilities.
Conversion also makes sense for both existing tenants and new occupants because it lowers the barrier to entry to purchase, gains control over their business premises, and fixes the costs and terms of the lease. In addition, buyers gain immediate built-in equity and the prospect of steadily increasing value in the future — not to mention long-term capital appreciation and financial stability.
HIGHEST and BEST USE
Markets are dynamic so the highest and best use — i.e., the greatest value — of a property today may not be the highest and best use tomorrow. Conversion has been shown to be an effective pathway to the highest and best use of a commercial property. (Despite the pandemic, office condominium sales in Manhattan increased by 73% in dollar volume in the second half of 2020 compared with the first half of the year, according to the Rudder Property Group.)
A BRIGHT FUTURE
Despite the devastating impact of the Covid-19 pandemic on our cities, with half-empty office towers, closed restaurants and cafes, and shuttered stores and other businesses, many experts believe the long-term prospects for our urban centers are bright. Indeed, some observers believe the pandemic has created a rare opportunity to reimagine our cities in ways that are both good for business and good for people.
The massive shift to work-from-home during the pandemic has dispelled the notion, once and for all, that workers must be tethered to their offices to be productive. Indeed, many companies have found that their workers are more productive at home than in the office.
Although demand for office space has declined significantly since the onset of the pandemic, most experts predict the market will bounce back strongly within a few years. Over the long term, most companies still want their workers in the office at least part of the time to promote collaboration and morale.
With many offices and other commercial properties sitting empty because of Covid, building owners are becoming more creative about how they position their properties. Instead of being boxed into the old paradigm of rent or sell, many are seizing on the opportunity presented by the pandemic to consider a third option — condo conversion.
Owners who continue to lease their properties are offering more flexible terms and more attractive amenities to keep existing tenants and entice new ones. “Lease to own” or “rent to own” agreements, in which tenants have the option of purchasing their space by an agreed-upon date, is one option gaining favor. Short-term leases are also becoming more common in commercial leases.
Complex contracts are being streamlined and simplified so tenants can understand them without hiring a lawyer. And restrictions, such as those that prevent subletting, are being relaxed so tenants have more flexibility in how they use their space.
‘MINIATURE URBAN HUBS’
Experts envision the office of the future will resemble “miniature urban hubs” designed to enrich workers’ lives. In addition to providing a place to work, offices will offer opportunities for socializing, learning, food and fitness, entertainment, and even overnight accommodation. “We will see greater emphasis placed on creating the best possible human experience, with more focus on supporting learning and development, creativity and collaboration — the real reasons people and businesses want to work together,” the World Economic Forum predicted.
Local governments are also taking advantage of the pandemic to modernize the outdated building and zoning codes. San Francisco, for example, introduced a program called Shared Spaces that cut through reams of red tape to enable restaurants to open outdoor dining spaces with one streamlined application. Other cities, like New York and Los Angeles, have followed suit. Many cities are also easing restrictions on mixed-use buildings — buildings with a mix of commercial, residential and/or retail — to boost economic activity while, at the same time, creating livelier and more interesting neighborhoods.
Request your complimentary copy article by Jen Chan:
“Reimagining Our Cities — The Pandemic Has Accelerated Efforts to Humanize Our Urban Centers”
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