More Office Owners Are Turning to the Wrecking Ball Instead of Conversions

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Office-to-residential conversions have become trendy, but as challenges mount in the office sector, some owners are looking to demolish instead. Plus, American Homes 4 Rent is pivoting to an in-house homebuilding division but faces stiff competition from some of the largest U.S. real estate firms.

Now, let’s dig in!

More Office Owners Are Turning to the Wrecking Ball Instead of Conversions

As older, outdated offices struggle with high vacancy rates, many owners dream of giving them a new life with a residential conversion. Not all of these offices are so lucky, and some owners are opting for the last resort of demolition.

Large developers like SL Green, Silverstein Properties, and RXR Realty are making splashy headlines for office-to-residential conversions in cities like New York. Small landlords needing more capital or knowledge to complete conversion projects face more challenges. Some are turning to the wrecking ball instead.

Demolitions moving forward in New York City include 5 West 13th St., where Legion Investment Group recently filed permits to tear down a 130,000-square-foot office building shortly after purchasing it for $57.5 million.

In Lake Charles, Louisiana, city officials are giving up hopes of rehabilitating the Capital One Tower, which was damaged by a hurricane in August 2020. Lake Charles Mayor Nic Hunter told residents recently, “It’s time to move on,” and “four years is long enough for us to stare at this eyesore in our community.”

Office-to-residential conversions have become trendy and are way less wasteful than knocking down outdated properties. However, many in the industry are discovering these conversions are almost always prohibitively expensive compared to demolition, and there are a limited number of suitable offices for such conversions. 

As financial pressure mounts on office owners in a struggling market, office-to-residential conversions may prove to be a fringe trend in the long run.

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