Why It’s Tough to Make an Office a Home

We are heading toward empty office space from several directions.

Working from home during a day or two each week, we’ve only partially returned to the office. McKinsey tells us that when offered remote work, 87 percent of us say yes. Then, further cutting office occupancy, firms like Zoom and Alphabet laid off employees. In Austin, Texas, Meta decided to sublet 589,000 square feet it had expected to use only 10 months earlier.

For landlords, it all adds up emptier buildings that need tenants. In addition, neighborhood businesses want customers.

Are apartments the solution?

Converting Empty Office Space

At first the solution seems like a no-brainer. With an office glut, an affordable housing shortage, and local businesses with diminished demand, cities just need more apartments. Then, though, reality kicks in. Office buildings have structural columns and elevator shafts that shape usable space. Their owners have to observe regulations that determine what they can call a bedroom and the number of windows.

As a result, it is easier to convert older buildings because real light and air were necessary when they were constructed. In New York’s Empire State Building, for example, smaller offices are 28 feet from windows (you can open) to a common corridor. Many also have higher ceilings.

Below,  in the older building (on the left) you can see how the line up of offices can become apartments:

But, fast forwarding to newer buildings, we see the impact of air conditioning and incandescent light bulbs. Much tougher to convert, newer buildings have larger spaces and less need for windows. They have too little natural light, too many elevators, and windows that won’t open. One expensive solution in NY’s lower Manhattan was carving a courtyard in the middle of the existing office building.

In a converted building, this central courtyard is surrounded by apartment windows:

Depending on the city, there also are different regulatory stipulations for offices and residential buildings. They vary for earthquakes and wind resistance. In New York, a bedroom has to have a working window but not in Philadelphia or San Francisco.

Our Bottom Line: Future Cities

As economists looking at empty office space, we wind up with the basics of land, labor and capital. We can also recall what mathematician Benoit Mandelbrot said about the British coast. Seemingly finite from a distance, a close look reveals quite the opposite.

Having been in Manhattan yesterday and seen so many storefronts with “for rent” signs, it makes me wonder about the transition to our future cities.

My sources and more: The NY Times introduced me to the office builiding occupancy problems here, here, and here, Then, McKinsey reported its remote work conclusions and this Penn professor talked about the issues.