It’s hard to get your mind around the concept of a billion square feet of office space, but that’s about what is sitting vacant in the United States. Landlords and banks have been trying to pressure CEOs to get people back to the office. Some are taking that route, but most are realizing that the office they have is no longer the office they need. Realistically, most larger companies only need about 40% of the physical footprint they had with everyone in the office. And when you figure the cost of providing a desk, electricity, etc. to one person costs between $11,000-17,000 annually, depending on the market, there’s a lot of money to be saved by embracing remote or hybrid work. But that’s a conversation for another article. Let’s figure out how to fill that space.
Residential Please
There’s a need for more housing in most places. There’s sort of a romantic idea of converting buildings into homes. Old factories in particular make for some amazing living spaces. Many offices can also make for some very nice residences once they have been converted. But therein lies the problem. Office buildings generally were not designed to be carved up for individual residential usage. There are logical issues with movement through the building and then plumbing and HVAC that need to be completely redone. Depending on the age and configuration of the building, typically only about 17-25% of buildings are candidates for residential conversion. Ideally, you want to reuse a building without making significant changes to its physical structure. The easiest way is to create something that follows the same model.
Not Too Cool For School
Anyone who has been to public school and eventually went on to work in an office has probably noticed some similarities. There’s always been an argument that schools don’t prepare you to think, they prepare you to work in an office. There’s a similar layout of desks to cubicles. The teacher has been replaced with a manager. And the principal, in his/her corner office, has been replaced by a CEO. Or some variation of that.
Outside of the gymnasium, there are other similarities as well. Hallways leading to classrooms (offices). Centralized bathrooms and probably a cafeteria. Hours are fixed, and the building is designed to move people easily at certain times of the day. Space needs are about the same for an office worker or a student. As a bonus, converting an office to a school often requires little or no physical modifications. Some new furniture, a fresh coat of paint, and some redecorating, and you are good to go.
Now, there are some limitations to the concept based on market need. You can’t cluster schools together like you can office space. But for communities that have existing schools needing space, or communities that need a new school, it’s a fast track to making that happen. And it seems to be working quite well.
Success Stories
Here are a few of the many successful conversions;
- The University of California, Los Angeles, recently bought the former Westside Pavilion Mall and created a research park. It is 700,000 square feet and is only 2 miles from their Westwood campus.
- St. Francis College in New York signed a 30-year lease in an office tower above a Macy’s in Brooklyn. They took over 3 floors of the building utilizing over 250,000 square feet of the art deco Wheeler building. I’m sure the Macy’s on the first floor benefits from the additional foot traffic as well.
- In 2022, The University of Louisville in Kentucky was gifted an office building in downtown Louisville. Humana donated the 8-story building along with most of its furnishings.
- When Jack Welch, the longtime chief executive of General Electric, presided over a global headquarters on a sylvan expanse in Fairfield, Conn., in the 1980s and ’90s, he probably did not envision college students streaming into its two pristine office buildings. Students at Sacred Heart University now attend class on floors once filled with file cabinets and cubicles.
- George Washington University exercised an option to buy a 10-story office building from an arm of the World Bank last year, paying a mere $11.5 million for a property valued at $230 million.
- It’s not just in the United States either. With demand for office space declining and the number of students coming to Canada increasing, the education sector is providing a needed boost to the Greater Toronto Area office market. Western University recently acquired 130,000 sq. feet of former office space to meet the needs of students.
An Added Bonus
Replacing office space with educational space has a similar interaction with the ecosystem. You can use the same cleaning company, the same cafeteria contractor for dining, etc. Outside the building, aside from a changed demographic, restaurants are likely to have a similar amount of patronage (for college students but maybe not high school.). In some cases, students may do more for the surrounding economy if they are not commuting.
Now, anyone in higher education knows that all is not rosy in that world either. There’s a lot of consolidation and many smaller colleges have closed recently. At least 72 colleges have merged or closed since 2020. And for those that don’t work out, there are still other uses for that space. Schools make good spaces for community programs like WIC. In the case of my town, the old school is the town hall (The old town hall is now the historical society). There are always possibilities for space if you look past its previous use.
