Holly Arnold: Converting Offices To Homes

Remember office buildings? They were places people used to go in order to work. Since the pandemic, though, vast numbers of office spaces have been abandoned. Have you ever found yourself musing, “it’s a shame they can’t do something with all of these empty buildings?” This week’s guest on Sea Change Radio has put a lot of thought into that very quandary. Holly Arnold, an architect with Gensler, a global architectural, design and planning firm, joins us to discuss the conversion of commercial real estate buildings into residential housing units. We look at what it takes to transform office space into living space, the opportunities it presents for the underhoused and those experiencing homelessness, and the complications and challenges involved in transforming the face of financial districts around the planet.

00:02 Narrator – This is Sea Change Radio, covering the shift to sustainability. I’m Alex Wise.

00:17 Holly Arnold (HA) – At the end of the day, it’s a no brainer using what’s already there is the better sustainability story.

00:25 Narrator – Remember office buildings? They were places people used to go in order to work. Since the pandemic, though, vast numbers of office spaces have been abandoned. Have you ever found yourself musing, “it’s a shame they can’t do something with all of these empty buildings?” This week’s guest on Sea Change Radio has put a lot of thought into that very quandary. Holly Arnold, an architect with Gensler, a global architectural, design and planning firm, joins us to discuss the conversion of commercial real estate buildings into residential housing units. We look at what it takes to transform office space into living space, the opportunities it presents for the underhoused and those experiencing homelessness, and the complications and challenges involved in transforming the face of financial districts around the planet.

01:41 Alex Wise (AW) – I’m joined now on Sea Change Radio by Holly Arnold. Holly is an architect at Gensler in San Francisco. Holly, welcome to Sea Change Radio.

01:50 Holly Arnold (HA) – Hi, thank you so much for having me.

01:53 Alex Wise (AW) – So what do you do at Gensler? Why don’t you first explain what Gensler is and what you do at the firm?

01:58 HA – Sure, absolutely. Gensler’s an architecture and design firm we were founded here in San Francisco in 1965 and my role here at Gensler is I’m in charge of leading the residential practice. Up and down the West Coast here in the Northwest region from Vancouver, down here to the Bay Area.

02:19 AW – So I wanted to have you on because you have delved into this topic more than anyone I can find on the Internet and that’s better understanding what it takes to retrofit a commercial building for residential purposes. Why don’t you first explain what that entails? Maybe give us some examples of it in action.

02:40 HA – I think you know, before we even get into that, you know, just the whole idea of why we would even look at such a thing here in San Francisco the way we have worked and the way that we work in specifically the downtown area has been changed, likely forever, by the pandemic and by the shift to a more remote work model. And now we find ourselves in downtown San Francisco with more than 27 million vacant square feet of office building and we’re centered around finding solutions to build the city to create a more vibrant downtown. And as designers, we can’t help. But kind of consider these solutions that that could create a more vibrant downtown through design and through adding, mixed-use kind of occupancy to the downtown area. So when we talk about office to residential conversion, what we’re talking about is taking buildings that sit in the downtown area or maybe somewhere else for that matter, and changing them from a place that houses offices and cubicles and office chairs into apartments and condos for for people to live in and because we have all these vacant buildings, it seems like in like an easy proposition. You know, we have a lot of people that need housing and we have a lot of empty buildings. So why don’t we just put the people in the empty buildings and solve two problems at once? It’s a very complicated proposition and things have to be lined up in just the right way to make it successful.

04:39 AW – This isn’t some pie in the sky idea. We’ve had people on sea change radio before talking about vertical farming and very futuristic ideas. This is very much a reality. Why don’t you walk us through some places around the globe that are good examples of what we’re talking about?

04:58 HA – Absolutely. This is something that New York City has done back after 9/11 to bring people back down. Downtown, it’s something that’s happened in Philadelphia. It’s happening in Houston and I think most notably, it’s happening in Calgary, in Canada and Calgary is maybe ahead of ahead of the game and that they’ve identified A2 pronged approach to this conversion and it’s really recognizing that they have to streamline their approval policy and in the process, to allow these buildings to be approved through the city and then also incentivize through through actual dollars to the developers. So their program not only has the streamlining policy part, but it also gives a dollar amount to developers to convert office to residential to spur people moving back downtown. And that program has been very successful. They’ve finished their first round of funding. I think it’s about a $45 million pool of money that has come through an economic disaster relief program there and it’s enough to push them over the edge and get them to actually happen.

06:15 AW – And what are some of biggest challenges that someone in your field faces Holly to try to overcome and get these retrofits through?

06:25 HA – I think NIMBYism is often something that we encounter, you know, change is difficult sometimes and there’s often opposition to that. I think when you’re creating residential in a downtown district that already has existing office buildings. That part is less of an issue. We haven’t seen that sort of NIMBYism yet, but I think the big issues that that do face the conversion are construction costs. Construction is expensive, and even making that that switch, it’s sometimes a challenge for developers to be able to look at getting that construction done. The design and construction and getting the permits done. And then at the end of the day, being able to rent that space or sell that space for enough money to justify the effort in the first place. And as I mentioned, one of the things that Calgary found was successful for them was really helping streamline the process. And what I mean by streamline the process, means when you begin a building project in San Francisco or really anywhere else, there’s a lot that goes into communicating with the city. You have to take the drawings and the plans and go to the city and say, hey, we’d like to build this project. And the city says, “OK, well, you have to meet XY&Z and you have to pay these fees and come up with these plans.” And we’ll look at the plans and if they’re OK with us, then we’ll approve it. And that process that we call entitlement can take sometimes years in, in this environment.

08:03 AW – And how does that compare…retrofitting versus building a new building in terms of this process?

08:08 HA – That’s a great question. It should be shorter. We should see it shortening that length of time because the building is already there. The building is already existing, so we know that it’s not going to cast any new shadows. On any parks or it’s not going to block anyone’s view because it’s already there. So that’s a real advantage to this office to residential conversion and that that the, the building envelope is there, it already exists. So that’s a that should in theory be able to to shave time off the the approval timeline, there are a lot of requirements for residential. There are requirements for inclusionary housing in order to be able to for the city to create a pipeline of affordable housing. There are inclusionary mandates, which are great things, but sometimes can be a little bit of a deterrent to developers because it hits the bottom line of the project and there are requirements through CEQA. I’m sure you’ve had folks on before that have talked about CEQA – the California Environmental Quality Act and again, good protections for the environment, but also, you know, sometimes people use the loopholes to kind of stop the process and and find a way to delay the approval of projects like this. We’re starting to see a lot of pro housing legislation in California. Looking to help ease that process and help streamline things so that there aren’t so many hurdles to get through in order to deliver these.

10:09 (Music Break)

10:40 Alex Wise (AW) – This is Alex Wise on sea change radio and I’m speaking to architect Holly Arnold. She works for Gensler. So Holly, we’re talking about the price of converting office space into residential housing. How does it compare to building a whole new office building in San Francisco? Let’s just take some of these buildings that have been lying fairly fallow for the last three years, some very expensive property, some of the most expensive commercial real estate in the world, I imagine. So what’s the opportunity cost for not having it filled with somebody, whether they be residents or office workers?

11:23 Holly Arnold (HA) – That’s a great question. I think we’re going to, we’re going through some, some real changes right now in downtown and I think we’re not exactly you know, it’s not exactly clear what the outcome is going to going to be I think you know historically the challenge has been that office space in downtown San Francisco, rents for more than what you could rent residential space. So the same square feet if their office will yield more than the same square feet is residential. Right now, the office numbers are coming down.

11:59 AW – and I imagine people are not going to be renewing their leases as well once they run out or the subsidies run out.

12:06 HA – That’s right. So it’s a very complicated equation, but the buildings, the building values are coming down because they’re not able to rent at the same rates. And there’s not the demand, especially for office buildings that aren’t brand new and that haven’t just come on to the market. So buildings that are older, maybe historic buildings, maybe buildings that were built in the 1980s that aren’t quite as nice as what some of the newer buildings are, some of the newer buildings have very rich amenity spaces. The Class A, the brand new office space, that’s where people want to be when they’re coming downtown to go to offices. There’s a real flight to quality. The people who are coming to offices want to be in an office space that has lots of amenities, and that’s a that’s a that’s a an exciting place to be. There’s less of a demand for the older buildings that that maybe don’t have those amenity spaces, so the future of those older office buildings is really is really up in the air. And as their prices start to come down, that’s where I think that we’re going to see some real opportunity for the office to residential conversions to build a brand new unit in San Francisco right now, the average cost is $1,000,000 million dollars per unit to build a new ground up unit.

13:36 AW – A unit being?

13:38 HA – An apartment.

13:39 AW – Right. And our listeners around the country who are not familiar with the San Francisco housing issue there, there’s a lot of mandates in place to try to create more housing for people. We have this disconnect between emptying offices and very high demand for residential spaces and a lot of homelessness as well.

14:02 HA – Absolutely, absolutely. And the state has laid out the the regional housing needs assessment and through that process it’s been identified that that San Francisco specifically needs to produce about 10,000 residential units per year for the next 8 years to meet the demand of an existing need that hasn’t been met previously and historically. If you look back over the past five or ten years, I think the most units that have been delivered or created in San Francisco has been about 5000 units. So it’s a really ambitious goal, but I think it exposes this huge need that we’re all we’re all aware of and it does tie right into the to the homelessness issue as well.

14:57 AW – And I want to explore that later, but just give us an idea of square footage and the amount of units that could be created from, let’s say a sales force or Millennium Tower. One of these 50-60 floor skyscrapers.

15:12 HA – So I mentioned earlier that Gensler worked with Calgary on their on their issue and through that work, we developed a scorecard which helped evaluate vacant buildings to help identify which buildings had the greatest potential for success and being converted. And this is looking at buildings from an architectural perspective. And we developed a set of five areas and through this we’re able to kind of pinpoint the ones that have the greatest chance of success. So Calgary used this and part of their program and in finding those, those buildings that have been converted, we had a group of interns last summer, some research fellows that that did the same thing in downtown San Francisco as part of a research projects and identified 12 actually 36 different buildings that they wanted to study and of those determined that 12 would make very good candidates for conversion. We identified these 12 buildings and if those twelve were to move forward, they could create about 2500 units of residential for delivery. So this idea of office to residential conversion in and of itself will not solve San Francisco’s housing crisis, but because of the numbers that I shared with you earlier, the 5000 units on our best on our best year, is about half of what we need to do for the next 8 years. So given that we need to find every possible angle that we can come at this, this housing crisis with and the office to residential conversion, we think has great potential for downtown San Francisco, it won’t solve all the problems, but it will help.

16:56 AW – So I was just asking about the square footage and the cost, but what about the time? What’s the conversion time generally to retrofit an office into residential space as opposed to building an entirely brand new building? I imagine it’s quicker to convert than to start fresh, right?

17:19 HA – And if you think of it in terms of a building and its structure, its superstructure, or it’s skeleton, the structural system that holds up to the building. And because San Francisco has some some special requirements that are unique to this city that are different from just the California Building code, there are some specific things that have to happen in San Francisco. It’s a little bit more, there’s a little bit more of a burden in terms of the cost of the building. So one thing that affects the office to residential conversion in San Francisco that’s maybe different than other places, is that we will have to look at the requirements for us for a seismic retrofit. So that’s something that we have to involve our our our structural engineer friends and have them take a look at these buildings as well to understand. What those requirements are, but even given that requirement, if we look at a typical ground up construction project. The first step is digging the hole for the building and digging the foundation. If anybody remembers what it was like the sales force tower or any of the buildings that have gone up recently in the Trans Bay, kind of in the in the Transbay District, digging that hole, going down 123456 stories, and then coming back up out of the ground to grade. There’s all kinds of excavation. There are the piles. We know all about piles and foundations from, you know, the whole Millennium Tower saga. It takes a long time to build that foundation underneath the building and then to build the basement up and then to come back up to grade. Sometimes it can take, you know a 25% or a third of the time that it takes to build the whole building is below ground. And if we think about an office to residential conversion, that part’s done. That part you don’t. We don’t even need to do that so thinking in terms of the lifespan of a construction project, you could shave a third off  the timeline just by not needing to do foundations. That’s a pretty appealing idea. You know, there are people who have done it in the city and it’s not taken a third less time. But if we look at it very generally, high level. We don’t have to do the excavation. We don’t have to do the below grade work. There’s no dewatering of the of the project. There’s a lot that doesn’t need to happen, and that’s a huge savings from a cost standpoint and from a time. Point and then the other big thing is the building skin, the facade. If we can reuse it, it saves even more time and money if it has to be replaced. It’s obviously it’s a big expense, but it looks like a new building at the end of the day. So there are there are definitely pros and cons.

20:20 (Music Break)

21:12 AW – This is Alex Wise on Sea Change Radio and I’m speaking to Holly Arnold. She is an architect at Gensler. So what’s the value proposition to a commercial real estate developer converting their building to a residential unit and as a subset of that, is there some kind of a cultural divide I I’ve just, I don’t know a lot about real estate developers, but I know whenever I’ve spoken to them, they’ve been clear about whether they do residence or commercial – so for a developer to make that leap into the residential space, is that some kind of a barrier?

21:46 HA – Well, I think there’s a lot, there’s, there’s a lot that’s specific to the developing residential projects that’s that’s a little different than developing commercial projects and and some developers do both commercial and residential, some are only residential, some are only commercial like you mentioned. But the value proposition is that some of these buildings, like we’ve talked about, don’t really have much of A future as office building in the city and some think that while we can sit and wait for the office to come back to downtown, but you know there are lots of signs that are pointing to that, it’s not going to come back like it was before. It’s going to be different than it was before and it if the idea is to sit and wait for 10 years, that’s a lot of potential lost income just having the building sit there, paying taxes and not really having any income. So we know that there’s a demand for residential and the demand for residentials right now. That conversion does cost money and it varies building by building. There are so many different, every building has its own unique challenges and opportunities as well, depending on where the building is located and what kind of windows it has. We do a lot of studies to look at what would residential units look at if you if you were to convert this particular office building to residential and there are definitely pros and cons to every unique building in in San Francisco’s downtown. But at the end of the day, I think the value is helping to solve the housing crisis that we’re feeling, so desperately right now and a faster path to having a building generating income where it may not be for.

23:47 AW – And those facing the housing crisis at its apex are the unhoused. And I know Gensler has worked with a nonprofit called Dignity Moves. Maybe you can talk about what their mission is and what this idea of converting office space or residential may hold in terms of solving or helping to abate the problem of the unhoused in San Francisco and elsewhere?

24:12 HA – Absolutely, dignity moves as an organization whose mission is to find interim housing for those experiencing. Homelessness and to get them settled in a sheltered situation so that they can move on and find permanent housing and and more housing security. We worked with them on a number of projects in San Francisco and around the Bay Area. 33 Gough is complete. We have a project in Rohnert Park. We have a couple of projects in Santa Barbara. And one that’s finishing up construction right now in Alameda and the funding sources are different. Some of them are more temporary. Installations or sites like the 33 Gough site is only intended for a short period of time, meaning that.

25:09 AW – Transitional housing, basically?

25:11 HA – Well, transitional housing, but also the units that are there are may are made to be moved somewhere else. So once that site is taken back by the city or taken back by the developer those tiny homes can actually be loaded onto a truck and move to another site and put to work. There we have a the project that we’re working on in Alameda is is funded through a state a state program home key and that one is really geared to a longer and a longer a longer lifespan. So that one will live for 15 to 20 years and provide interim housing for people for that long. So that one’s a much more permanent it’s it’s permanent temporary permanent interim house. Thing, but the dignity moves goal is to scale this scale this operation really to address homelessness across California and beyond. It’s really an incredible organization. We’re so excited to work with them.

26:24 AW – Well, we were talking about the construction costs and time, but we haven’t really addressed the carbon footprint aspect of that. How does it differ, Holly?

26:34 HA – You can’t beat the carbon footprint of a building that’s already there, a building that already exists versus a new build. Is a better proposition in terms of the environment all day long, reusing what you already have versus creating something new is a better resilient story and there are clients that we work with who have. Invested in in that the idea that beyond the bottom line beyond the value of the purely financial value of the building is the sustainable impact and understanding that it could take 80 years to pay back that that carbon of a new building that that, that impact is huge compared to reusing the superstructure, reusing the building that’s already there and maybe redoing the mechanical systems and maybe redoing the windows or or part of the skin at the end of the day it’s a no brainer using what’s already there is the better sustainability story.

27:58 AW – Holly Arnold, thanks so much for being my guest on Sea Change Radio.

28:02 HA – Thank you, Alex.

28:17 Narrator – You’ve been listening to Sea Change Radio. Our intro music is by Sanford Lewis, and our outro music is by Alex Wise. Additional music by The Clash, Hot Rize and Howlin’ Wolf. To read a transcript of this show, go to SeaChangeRadio.com stream or download the show or subscribe to our podcast on our site or visit our archives to hear from Doris Kearns Goodwin, Gavin Newsom, Stewart Brand and many others. And tune in to Sea Change Radio next week as we continue making connections for sustainability. For Sea Change Radio, I’m Alex Wise.