Some real estate owners and businesses have to find creative solutions for properties that are not currently generating revenue. Many other investors want to take advantage of the declining demand for some types of commercial real estate. After all, buying when prices are low is generally an excellent opportunity.
Recent years have seen a massive boom in the conversion of office space. With companies offering flexible scheduling and work-from-home arrangements, the demand for traditional office space has declined in many areas. Those who currently own property or who may want to invest in commercial real estate might want to join in on that trend.
Taking unused office space and converting it into residential units can be highly profitable. Apartments can offer ongoing revenue, while condos can produce a significant return on the initial investment to acquire the space. Before investing in a commercial property or committing funds to project development for an existing property, addressing zoning issues is likely going to be necessary.
Zoning can be a major hurdle
Zoning laws exist to protect property values and the characteristics of a neighborhood. Residential zoning prevents businesses from polluting and bringing in heavy traffic to an area filled with families, for example. Areas with commercial zoning may see a huge amount of traffic and may have specialized infrastructure in place to help support businesses.
The current zoning of an office building can prevent an owner from converting the building into residential units. There are two potential solutions available. The owner could pursue a zoning variance or they could request to rezone the property permanently.
Both solutions require paperwork filed with local municipal authorities and reviewed by the community. Changing the zoning at a property or securing a variance can be a long-term project that takes a year or more to complete. Members of the local community may potentially oppose the project.
That being said, a lack of affordable housing options and constant demand for housing can potentially make it slightly easier for businesses seeking zoning changes to move forward with a redevelopment or conversion project.
Zoning is only the first of many concerns. While local authorities and community members may embrace a residential conversion of an office building, there are many other hurdles to overcome. Massive structural changes may be necessary to produce compliant units. The project may require multiple years to complete, meaning that owners may have to wait quite some time before they start receiving revenue from sales or leases.
Exploring zoning concerns and other factors that can influence an office conversion project can be beneficial for owners and aspiring investors. Those who understand what such projects require can determine whether converting an office building is a realistic undertaking.