I keep hearing that empty office buildings are an economic time bomb. I keep hearing that housing inventory is low which is why house prices are high. Why can’t we convert offices to homes?
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While zoning is a big issue, the root cause is money.
If you built a $100M office building and borrow the money, you need rent that covers the mortgage payments and operating costs. With office space at $100/sf per month, the math checks out.
Alas, with housing rents at $10/sf per month, you can’t afford to pay the mortgage. The bank forecloses, and there is a giant mess.
To do conversions, which many locales are doing, the bank has to write off a big loss, as the building is now a $10M condo building. That’s a big obstacle, as banks don’t like to take losses, and an empty office building can still be a “$100M asset” on the books for an audit or two.
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