According to a recent RentCafe/Yardi Matrix report, the Atlanta metropolitan area will see 2,239 spaces come to life through office-to-apartment conversion projects, which make up 56% of all adaptive reuse projects underway. That is the sixth most in the country. Boasting a 57% year-over-year increase in office conversions, Atlanta has emerged as a key player in the adaptive reuse landscape. However, only 14.2 million square feet worth of office buildings (6% of the metro’s total office inventory) are deemed suitable for future office-to-apartment conversions. A notable project is the transformation of the building at 2 Peachtree St., which is expected to create at least 200 new apartments within its 890,000 square feet of space.

New York is the leader with 8,310 units, followed by Washington, DC, Los Angeles, Chicago Dallas and Atlanta.

With the rate of office-to-residential conversions accelerating, a new venture has formed with plans to pursue $1B of the notoriously complex developments.

The former New York City FBI headquarters building converted to apartments by TF Cornerstone at 201 E. 69th St.

Dune Real Estate Partners and TF Cornerstone formed Alta Residential, a joint venture that plans to target buildings with high barriers to entry in transit-oriented residential neighborhoods. The partners are eyeing New York City, Washington, D.C., Boston, Charlotte, Raleigh, Atlanta, Dallas, San Francisco and Los Angeles, according to an announcement by the two New York City-based firms.

“Investors have reacted very positively to Alta as a means to access high quality urban residential, and we have already received significant interest from a wide range of investors,” Dune CEO Dan Neidich said in a statement.

TFC, founded by brothers Thomas and Fred Elghanayan, has developed more than 21M SF of residential and commercial properties, mostly in their hometown of New York. The company was formed in 2009 after a coin toss decided how they would break up the $3B real estate empire they owned with their brother, Henry, who runs Rockrose Development.

The private developer owns and operates nearly 12,000 residential units in Manhattan, Brooklyn and Long Island City, along with over 4M SF of commercial, office and retail space in New York, D.C., Virginia and Pennsylvania.

TFC has completed 5M SF of commercial to residential developments across 15 projects. Those conversions include 95 Horatio St., a former refrigeration facility in Manhattan’s Meatpacking District that was converted to 318 residential units, and The Fairfax, a former New York City FBI headquarters building at 201 E. 69th St., which was converted to 313 residences.

As part of the joint venture, TFC plans to oversee and partner with Alta to convert certain New York City office buildings into apartments, according to the announcement. A spokesperson couldn’t provide further details prior to publication.

In a statement, TFC CEO Thomas Elghanayan said that he is “confident that we’ll be able to scale Alta very quickly.”

Dune brings with it opportunity fundraising experience, according to the announcement. Since launching in 2005, the firm has raised over $4B of equity capital, including through its funds and other investment vehicles. It invests on behalf of public and private pension funds, sovereign wealth funds, educational endowments and other large institutions as well as high net worth investors. 

It has experience with bold projects in the city — it is a partner with Turnbridge Equities on the Bronx Logistics Center, a 1.2M SF industrial development that was one of the first multistory warehouses in the city. A deal was in place for New York City to lease or buy it for as much as $670M, but that was scuttled after a New York City Council oversight hearing looked into real estate contracts handed out by Mayor Eric Adams’ administration.

Seneca One in Buffalo, New York

With office buildings across the U.S. sitting nearly 20% empty and with even more space available for sublease, many buildings must either evolve with the times or risk falling into oblivion. This record vacancy begs the questions, “What will the future of office work look like?” and, “How can office buildings be repositioned to cater to growing tenant demands for flexibility?”

A lot of ink has been spilled about converting obsolete office buildings into new housing stock, a feat that usually requires a perfect window line, narrow floor plates and a forgiving structure — not to mention new zoning, an entirely new capital stack and a special breed of operator, according to Brad Hargreaves’ Thesis Driven, a newsletter that analyzes the trends that shape the future of the real estate industry. 

The remaining office assets, however, don’t have to fade into obsolescence or be converted to alternative uses, said Simon Moore, chief operating officer of Serendipity Labs, an international flexible workplace provider.

“To regain their footing, owners need to serve up what today’s tenants want — flexible, highly hosted and inspiring workplace experiences,” he said. “What makes so much office space obsolete is that the long-term lease investing model is breaking as office leases are becoming shorter in term and smaller in size.”  

The problem, Moore said, is that most landlords are focused only on their investors’ demands for long-term leases and aren’t equipped to deliver against these expectations. 

The best office conversions are hiding in plain sight: a full or partial flexible office conversion from traditional office leasing. Such conversions offer move-in-ready build-outs in a variety of sizes, collaboration spaces and work lounges all configured and staffed to support requirements that would have ranged up to 20K SF before hybrid work took hold but are now much smaller.

“A flexible office conversion means more than just transitioning away from offering office space on conventional long-term leases using a legacy property management and leasing team,” Moore said. “It can involve repositioning the entire building to offer a fully serviced continuum of workplace solutions that are designed and programmed to match how companies want to consume real estate today.”

High degrees of flexibility, vibrant and welcoming five-star service, and access to a large national network of conveniently located, amenity-rich workplaces are what people are looking for.

Serendipity Labs’ flexible office and coworking conversions allow building owners to win market share from other buildings offering only conventional leases. The company’s offices offer shared tenant lounges, managed and branded prebuilt suites, meeting spaces to support team collaboration and larger move-in-ready spaces — all equipped with the latest technology, on-site staff and abundant amenities. The firm has found that the demand for this offering has risen considerably over the past several months, particularly in suburban markets.

Suburban and exurban areas have continued to flourish across the country, a trend that was in place even before early 2020 due to the reversal of the urbanization of the 2010s that was led by millennials. Among the fastest-growing areas of the nation over the past two years were towns more than 60 miles from a major city center. Over the same period, neighborhoods within 20 miles of a city center experienced a decline in population. 

People are now commuting to city centers less often from their homes in the suburbs or exurbs. Instead, they are opting for a work location that is closer to home to have shorter, less strenuous commutes, giving them more flexibility with their family responsibilities. 

Moore added that the best office conversions, whether in suburban or urban markets, involve transitioning offices’ operating and investment models to the tried-and-true hotel industry model, like Serendipity Labs’ workplace model.

Instead of signing a traditional lease as a tenant, Serendipity Labs licenses its proven workplace design, aggregates credit-quality demand through its own central marketing, and delivers day-to-day management services to landlords who want to win more market share for their building and keep existing tenants.   

Serendipity Labs licenses its brand and runs flexible workplace services for entire buildings in Manchester, UK; Rye, New York; Charleston, South Carolina; and the Charlotte, North Carolina, suburb of Lake Norman. It also manages most of a building as a flexible office offering in Westport, Connecticut; Dunwoody, Georgia; and Memphis, Tennessee.  

In Rochester and Buffalo, New York, landlords have incorporated Serendipity Labs into the redevelopment of Nixon-era urban towers that included converting floors from traditional office leasing to residential, retail and flexible coworking, Moore said.

“We are in this period of uncertainty in which companies are trying to rightsize their portfolios, transitioning from bigger office spaces to smaller ones,” he said. “They need to be able to scale up and down as needed or permanently outsource their workplace management requirements, and coworking spaces allow them to do just that.”

Office assets can evolve, and it is clear that they have to, Moore added. That’s why making flexible office space a part of the strategy can help buildings win market share and avoid obsolescence.

“It is becoming more obvious that fully or partially converting office space to coworking can ensure that buildings don’t get left behind,” Moore said.

This article was produced in collaboration between Serendipity Labs and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.  

Seattle Mayor Bruce Harrell recently signed a proposed bill that would promote the conversion of vacant and underused buildings into affordable housing.

The measure would help developers looking to convert existing buildings from commercial to residential uses. The proposed changes aim to make it easier and more straightforward to convert existing structures into residential use, supporting housing development in the city, particularly in and near downtown.

“While we know there remains a need for office space, this effort will give us flexibility to help optimize our built environment and create the downtown we want to see–a thriving workplace and vibrant community for families and residents of all backgrounds,” said Harrell. “These changes are a critical step in moving the idea of office conversion to a reality.”

The proposed legislation would establish clear guidelines for residential conversions and provide broad exemptions from design development standards. The changes would also reduce the cost of conversion to residential use by exempting conversions to housing from the City’s Mandatory Housing Affordability (MHA) requirements. 

GoodHomes Communities is looking for more…more underperforming hotels to turn into apartments in the Greensboro, Winston-Salem, and High Point area. The company is currently planning to convert the former OYO Burlington Hotel South, located on Maple Avenue, into an apartment community called OYO GoodHomes, which will have 135 studio residential units. The company recently received a $9.41 million construction loan from Forman Capital. Units are expected to be available for $900 per month.

The Triad Business Journal reports the developer currently has two properties in the works in Fayetteville. The first is GoodHomes Bordeaux, a 255-unit apartment conversion of a former 298-room Ramada Plaza & Baymont Inn & Suites, which consists of two residential buildings connected by a 60,000-square-foot former convention center.

The other property is a former Clarion that is being turned into GoodHomes Cedar Creek, a 201-unit apartment community with one-bedrooms and oversized studio units. Both properties were acquired in June 2023 and are expected to be completed in the second quarter of 2024.