As MMM's construction group discussed back in August of 2023, converting an office building into a multifamily residence is an intriguing concept but "not quite the silver bullet that will solve all the issues with both the market for commercial office space and housing supply." The Atlanta Journal-Constitution echoed that sentiment in a recent article summarizing the conclusions of a study commissioned by Central Atlanta Progress ("CAP").
After studying a number of office buildings in downtown Atlanta, CAP concluded that converting those buildings into multifamily residences would only be a viable development strategy for approximately ten properties. CAP's report recommends that the City of Atlanta develop a program that would provide public funds to developers for redeveloping offices into multifamily residences. Even if the City of Atlanta were to earmark public funds towards incentivizing the conversion of abandoned offices into residences, the true number of viable properties may not actually increase in line with CAP's projections because CAP's study does not factor in the costs associated with any structural renovations that may be needed. Doing so would certainly decrease the total number of office buildings that could be successfully converted into housing even with an incentive program. Any developer interested in pursuing such a conversion will have to carefully evaluate the existing structure to determine whether enough of the costs to convert that structure could be offset by any potential incentives the City of Atlanta may provide to make the project make financial sense.
Therefore, even if the City of Atlanta creates an incentive program to encourage redevelopment, these types of adaptive reuse projects will only present limited opportunities to transform neglected buildings into viable living spaces. When the costs associated with converting these properties are taken into account, the likelihood of identifying a truly workable opportunity is slim. But for the right developer, an attractive incentive program may provide the opportunity to transform a diamond in the rough into a crown jewel for their portfolio.
