Commercial-to-Residential Property Conversions: Financing Options, Tax Credits, Government Incentives

Description

Office property vacancies are especially high in many of the country's metropolitan areas, and owners of office space have begun to unload their properties at heavily discounted prices--evidence that stakeholders believe the soft office space market is here to stay. While local rules, zoning laws, and other market factors can make converting office space into residential space complex and expensive, conversion is a viable option for some properties, especially where tax credits and local government incentives are available.

Commercial-to-residential (CTR) conversions have been an agenda item for many urban planners and public officials in leading markets across the county with many cities implementing programs to aid conversion projects via zoning changes, expedited permitting processes, and tax credits and other incentives. The CTR conversion trend has drawn the attention of the federal government as the Biden administration recently released a guidebook outlining different federal programs that could be used to assist projects repurposing vacant office space for residential use.

Even with government incentives, converting commercial property into housing is not always financially feasible. Local regulations can make it difficult to convert modern office buildings with deep interiors into residential properties. However, converting office and retail space into residential property might make sense when obsolescence is the alternative, or when an older building bears features that might be attractive to potential residential tenants, but not to modern office tenants.

Listen as our authoritative panel discusses the growing trend of CTR property conversions. The panel will examine the pros and cons of such conversions and analyze the financing alternatives available that can make these conversions a viable option for owners and investors.