Developing Trend
Adaptive Re-use: Office to Residential
R oughly a decade ago, office vacancy rates in Downtown Pittsburgh began plunging from the high teens, eventually reaching six percent of all occupied space. There were some success stories that drove office absorption higher, but one of the key factors in the declining vacancy rate was the removal of outdated office space from the market through adaptive re-use as hotels and residential units. From the time of the Great Recession through most of the 2010s, more than 10 mid-rise office buildings were re-purposed, taking more than two million square feet out of the market. That trend cooled by the end of the decade. As the office vacancy rate has risen and the pandemic placed extraordinary stress on downtowns throughout the U.S., the Pittsburgh central business district has seen a revival of adaptive re-use of its office stock to residential and a new apartment tower proposed for downtown. The resurgent trend could not come at a better time for downtown. Downtown Pittsburgh was a corporate headquarters location through the 1970s. At one point following World War II, Pittsburgh was behind only New York and Chicago as home to the most Fortune 500 companies. That is the reason why 77 percent of the building stock in Downtown Pittsburgh is commercial office, one of the highest office ratios among U.S. cities. Because the density of corporations headquartered in Pittsburgh traced back to the industrial boom in America, an inordinately high number of those office buildings are old. Jeremy Waldrup, president and CEO of the Pittsburgh Downtown Partnership, points out that this last fact presents re-use opportunities that do not exist in newer cities. “We have to work through the repositioning of downtown. I say that because when you look at our poorest performing buildings, the 30 buildings with the highest vacancy rates average 111 years old,” Waldrup explains. “Those
buildings have likely played out their useful life as commercial office structures without major renovations that our market will not stomach. You will not get the rents needed to turn them into class A or B+ spaces again. Residential conversion is the best option for those buildings.” Waldrup pointed to the former Kaufmann’s Building and Commonwealth Building as examples of successful conversions. Both buildings are fully occupied (Kaufmann’s Grand has a waiting list), but neither were easy conversions. Both projects were completed by different owners than those that began the development. Some of the difficulties were unique to the project, but the challenges underline the fact that not all office buildings adapt equally. “One of the important factors for us is finding buildings that qualify for historic tax credits because that effectively gives you a 20 percent discount on qualified rehabilitation expenses, effectively your hard costs,” says Leonard Klehr, vice chairman at Lubert-Adler, the successful developer of Kaufmann’s Grand. “The kind of building that we look for has to have two fire stairs so that you don’t have to build those. Window alignment is important. The depth of the building is important. Buildings that are too deep and, by the way Kaufmann’s is a very deep building, create all kinds of issues. There is dead space where there are no windows. Because of building codes, you have to have windows for bedrooms. If there’s a lot of space without windows you either have to have an atrium within the building or you use that interior space for things like amenities. You look for things within the building that will impact the layout for apartments. Not all buildings have the kind of shapes that you need.” Strada Architecture LLC worked on several of the first large-scale office-to-residential projects in downtown on behalf of Property Management Corporation (PMC) and the Piatt Organization, designing conversions like the Clark Building Apartments,
Market Square Place, and the renovation of the former ALCOA headquarters on William Penn Place. The firm is currently involved in converting 642 Fort Duquesne Boulevard into 139 apartments for Douglas Development and 300 Sixth Avenue into 249 apartments for Victrix LLC. The architect also worked on the adaptive re-use of four Downtown offices into hotels – the Drury, Distrikt Hotel, Hotel Monaco, and the Embassy Suites. Dina Snider, principal at Strada, worked on some of those early adaptations. “Until COVID, when a developer found a building in a good location, we looked at it for what was the best use, hospitality or residential. Quite often the floor plate laid out identically whether you’re doing hotel or apartments, because there’s a similar configuration,” Snider recalls. “We were packaging them both ways and it was a matter of whose attention it got first. We would show how it could be done as residential and as hospitality and the developer would put feelers out to see who was the first to respond.” One of Snider’s partners at Strada, Sean Beasley, is currently leading the design on the adaptation of 300 Sixth Avenue into apartments. He echoes Klehr’s point about the need for tax credits. “There is a considerable amount of work to be done outside of just the apartment piece,” Beasley notes. “The infrastructure needs to be updated. That means elevator, sometimes even the stairs. We have found very few developers try to do adaptive reuse of those buildings without tax credits.” Beasley notes that many buildings with older infrastructure are often better suited to maintaining the office use. Complying with codes is much less rigorous when the same usage is being maintained. That isn’t the case when going from office to residential. “Most of the buildings we run into that aren’t modern construction the elevators are too small, the stairwells are too narrow, and there’s not enough shaft space
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