Office Vacancies Rise: Can Housing Fill the Void?
The commercial real estate landscape in New Hampshire has been undergoing significant changes, with office space vacancy rates climbing steadily over the past few years. According to a recent report from Colliers New Hampshire, the vacancy rate at the end of Q2 in June stood at 13.5%, marking a 2.4% increase from the same period in 2023. This rising trend has sparked discussions around whether these vacant office spaces can be repurposed into much-needed residential housing. While the concept is appealing and offers a potential solution to the state’s housing shortage, it is far from straightforward and presents a myriad of challenges.
Tracy Kozak, an architect based in Portsmouth, has been at the forefront of efforts to convert commercial spaces into residential units. She notes that Class A office vacancy rates have surged by 13.1% over the past five years, with a notable 8.5% increase just in the last year. Several factors contribute to this rise, including companies closing or downsizing their New Hampshire locations, particularly in the Dover, Portsmouth, and Salem submarkets. A significant blow came from Liberty Mutual’s decision to close its 575,800-square-foot Dover office by the end of 2023, which has had a substantial impact on the local commercial real estate market.
New Hampshire faces a pressing shortage of residential housing, with estimates indicating a need for an additional 23,670 units by 2023 and a staggering 90,000 more by 2040. The idea of repurposing empty office buildings into housing is frequently discussed as a viable solution to this problem. However, Kozak emphasizes that while the option is feasible, it is fraught with complications. Zoning restrictions and parking requirements are among the primary obstacles that developers face when attempting to convert commercial spaces into residential units.
Fire codes also pose a significant challenge, as they are typically stricter for residential buildings compared to commercial ones. This discrepancy can lead to increased costs and complexity in the conversion process. Despite these hurdles, Kozak’s firm, Arcove Architects, is actively working on proposals to transform approximately 100,000 square feet of commercial space into housing in the Seacoast area. The firm is exploring various types of housing, including apartments, condominiums, and townhouses, to meet the diverse needs of the community.
Zoning remains a significant obstacle in the conversion process. Different zones have varying requirements and restrictions for different types of housing, making it challenging to navigate the regulatory landscape. For instance, some areas may need to be rezoned to accommodate residential units, which can be a lengthy and complex process. Additionally, parking requirements can further complicate conversions, as residential buildings often require more parking spaces than commercial ones.
Despite these challenges, there is considerable interest in redeveloping office spaces into housing. This interest is driven by the growing demand for residential units and the increasing vacancy rates in the commercial real estate market. The industrial and warehouse sector of the commercial real estate market in New Hampshire, however, is showing signs of recovery. The overall vacancy rate for manufacturing, flex, and warehouse space is currently at 5.9%, compared to 2.9% last year. This sector experienced a surge in construction following the COVID-19 pandemic, with about 3.1 million square feet completed in the last five years and an additional 6.5 million square feet either under development or construction.
The potential for converting office spaces into residential units offers a promising avenue to address New Hampshire’s housing shortage. However, it requires careful planning and coordination between architects, developers, and local authorities. Kozak highlights the importance of collaboration and open communication in overcoming the various obstacles associated with such conversions. By working together, stakeholders can develop innovative solutions that meet the needs of both the commercial and residential real estate markets.
One of the key considerations in converting office spaces into housing is ensuring that the resulting units are affordable and accessible to a wide range of residents. This involves not only addressing zoning and regulatory challenges but also considering the financial feasibility of such projects. Developers must carefully assess the costs associated with conversions, including potential upgrades to meet residential fire codes and other safety standards. Additionally, they must evaluate the market demand for different types of housing and determine the most suitable options for each specific location.
The process of converting office spaces into residential units also presents an opportunity to rethink urban planning and design. By repurposing existing buildings, communities can reduce the environmental impact associated with new construction and promote sustainable development. This approach aligns with broader trends towards adaptive reuse and the circular economy, which emphasize the importance of maximizing the value of existing resources and minimizing waste.
Moreover, converting office spaces into housing can contribute to the revitalization of urban areas. By bringing more residents into previously commercial districts, these areas can experience increased economic activity and vibrancy. This can lead to the development of new amenities and services, such as retail shops, restaurants, and public spaces, further enhancing the quality of life for residents. Additionally, the influx of residents can help support local businesses and create new job opportunities, contributing to the overall economic health of the community.
While the challenges associated with converting office spaces into housing are significant, the potential benefits make it a worthwhile endeavor. By addressing the regulatory, financial, and logistical hurdles, stakeholders can unlock new opportunities for sustainable and inclusive development. This requires a collaborative approach, with input from architects, developers, local authorities, and community members. Through such efforts, New Hampshire can effectively address its housing shortage and create vibrant, livable communities that meet the needs of all residents.
In conclusion, the rising office vacancy rates in New Hampshire present both a challenge and an opportunity. While the conversion of commercial spaces into residential units is not without its complexities, it offers a promising solution to the state’s housing shortage. By navigating the regulatory landscape, addressing financial feasibility, and fostering collaboration among stakeholders, New Hampshire can transform vacant office spaces into thriving residential communities. This approach not only addresses the immediate need for housing but also promotes sustainable urban development and revitalizes local economies. As such, the repurposing of office spaces into housing represents a forward-thinking strategy that can benefit both current and future generations.