While the office segment seems to stabilize, record-high vacancies has a growing number of cities considering rethinking single-use downtown. All that empty space and no promises of how companies will operate the continuum from all-in office, flex, hybrid, and working from home.
Turning square footage into another use, like conversions to apartments at a time that housing stock is low and rents skyrocket, sounds good. But probably too good to be real, in the view of Moody's Analytics, which says the practicalities are difficult to surmount.
"Contrary to hints of a conversion wave, it's much easier to theorize about office-to-residential conversions than to execute and profit on them," wrote Moody's Jeffrey Havsy, Xiaodi Li and Kevin Fagan. "In our analysis, in addition to substantial physical impediments to office-to-apartment conversion, office values and rents would have to drop much further for the trend to become more than anecdotal."
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