Vacant offices to housing: A new reality takes shape for downtown

If come Friday the office takes on a postapocalyptic is-anyone-out-there feeling, you are not alone. Well, you are, but you aren’t. The daily office building occupancy in Boston on Fridays hits a mere 27 percent of what it was prepandemic. Even the high point of the week (Wednesday) clocks in at only 67 percent, according to the latest figures from the real estate firm CBRE.

Yes, the postpandemic world has new work habits, living habits, and commuting habits — and there’s every indication many of those changes are here to stay. The corporate world is adapting to those new realities — downsizing space and sometimes upgrading the space they are using by moving to newer buildings with more amenities.

And that helps explain why a couple of small downtown office buildings recently sold for bargain-basement prices.

Meanwhile, housing in the Greater Boston area is in such short supply that fears are rising it will be a further drag on the economy as young professionals and families scramble to find something — anything — they can afford to rent or buy.

So from the White House to the State House to City Hall, the idea of making lemonade out of the lemons of the current office vacancy rate by converting some of that vastly underutilized commercial office space to housing is getting an official boost.

The city has a new pilot program that offers tax breaks for such projects, which is “a step in making office conversions economically viable,” said Todd Dundon of the Boston office of Gensler architects.

“What it didn’t do was address the capital expenses needed to make conversions happen,” he said. And it’s those up-front costs combined with currently high interest rates that remain substantial disincentives.

That’s where a new White House campaign to promote conversions could make a difference, according to Dundon. Among other things, that campaign includes a guidebook to help developers navigate the maze of federal programs available to them, including low-interest loans, loan guarantees, grants, and federal tax incentives.

The Commercial to Residential Conversions Guidebook released last week lists 20 such programs across six federal agencies that could be accessed by developers. It doesn’t provide additional funds to those existing pools of money, but it does indicate a growing recognition at the federal level that “Office and commercial vacancies across the country are affecting urban downtowns and rural main streets” and that “office vacancies have reached a 30-year high from coast to coast.”

Boston’s downtown vacancy rate is around 18.5 percent right now, but Dundon points out that when you take out “the most attractive buildings, those Class A buildings,” the rate for the remaining office buildings in downtown can hit 35 percent.

Those are the buildings being targeted by the city’s tax incentive pilot program — a tax break of up to 75 percent (below the already far lower residential rate) for 29 years — which opened its application process Oct. 17. The first application has already come in to the Boston Planning and Development Agency, according to spokesperson Lacey Rose, and 10 other owners or developers have expressed an “active interest.” The city has identified 62 possible candidates for conversion and BPDA staffers have reached out to more than 50 of those.

But right now the city’s offer is only for a limited time. The application deadline is June 2024 and developers are required to begin conversions by October 2025.

So the new federal push comes at an opportune moment. So too does a section of Governor Maura Healey’s Affordable Homes Act, which authorizes $275 million for Sustainable and Green Housing Initiatives, which includes support for the “re-use of commercial space, office space, and underutilized state- or locally-controlled land or assets.”

Housing Secretary Ed Augustus told the editorial board in October that his team would be reaching out to Mayor Michelle Wu’s administration on possible office conversions, adding, “we’re going to be looking at a couple of projects here in Boston.”

The secretary in his previous role as Worcester city manager was instrumental in promoting the

Downtowns, Boston’s included, are not dead. But they are in transition. Vacant or nearly vacant office buildings can be repurposed and in the process be made greener and provide needed housing, which in turn will create the 24/7 life that makes any neighborhood thrive.

successful conversion of the historic but long closed courthouse in his city into 188 mixed-income residential units. Augustus and Healey visited the Courthouse Lofts complex Wednesday along with the 55-unit Central Building, a formerly vacant office building converted for residential use.

But first, of course, Healey’s $4 billion housing bill has to pass the Legislature, which continues to work at its own leisurely pace even faced with a Nov. 16 deadline for wrapping up formal business for the year.

Now even under the best of circumstances office conversions aren’t easy.

Beyond the expense of adding kitchens and bathrooms with all their attendant plumbing, Gensler’s formula to assess the feasibility of conversion factors in such issues as the shape of the building, window-to-wall ratios, ease of window replacement, and the availability of natural light.

And, yes, sometimes it is, as realtors say, location, location, location.

But while work patterns have changed, with many workers reluctant to give up the convenience of not commuting into central business districts, there was actually a recent piece of good news among Gensler’s research for downtowns.

“As urban centers emerge from the immediate aftermath of the pandemic, hybrid workers have not abandoned or lost enthusiasm for their downtowns” with 66 percent of those workers visiting those downtowns “at least some days they work remotely.” And 58 percent of downtown hybrid employees are working from cafes, co-working spaces, and other places within the downtown area.

Go figure. Perhaps it’s the dirty little secret of hybrid work schedules.

Downtowns, Boston’s included, are not dead. But they are in transition. Vacant or nearly vacant office buildings can be repurposed and in the process be made greener and provide needed housing, which in turn will create the 24/7 life that makes any neighborhood thrive.

In a rare kind of harmonic convergence, all three levels of government are moving in the same direction to make a good idea a reality. Office conversions won’t single-handedly solve the state’s housing crisis, but, successfully executed — and in a timely fashion — they can make a dent in that need and help keep downtowns alive.