One of Forbix's current adaptive reuse projects located at 222 West 6th Street, San Pedro, CA
The pandemic threw a proverbial wrench into many gears. Working from home transitioned from a desirable job perk to mandatory practice across many industries for those businesses able to sustain their work force. While the pandemic has subsided, the long-term impact in relation to employment has remained—when possible, employees prefer to work from home. Many employers are embracing this movement as reducing or eliminating brick-and-mortar locations saves on overhead costs as well as other expenses.
One of the results is an overwhelming surplus of vacant office space. Previously hot commercial markets like San Francisco went from a 4% vacancy rate in 2018 to 31.8% in the second quarter of 2023—that’s nearly one third of all available office space. Crime, continued layoffs and other socio-economic factors are driving that rate even higher. At the same time, there is a growing need for multifamily housing, especially affordable housing. However, rising interest rates among other economic factors are sidelining a significant amount of real estate investment dollars.
While there is no quick-fix or panacea, there is a growing development trend providing a counterbalance—adaptive reuse, which refers to the process of reusing an existing building for a purpose other than which it was originally built or designed for. For example, vacant office space can be converted into multifamily housing. The potential benefits are substantial, including maintaining economic and community revitalization within a given area. Sustainability is another advantage as existing structures can be more environmentally friendly than ground-up construction.
One such Forbix project is Tower 222 in San Pedro, CA, a prime Southern California oceanfront property slated for conversion from an office building into multifamily housing. The project will feature 250 residential units, 16,000 sq. ft. of storage space, 30,000 sq. ft. of commercial space, rooftop terrace and other amenities. The project is located in a Qualified Opportunity Zone (QOZ) which can provide significant tax incentives for investors. Another project recently featured in a CoStar article is Forbix’s Hillcrest project in Inglewood, CA, which is a conversion from a medical office into multifamily housing along with a high-end restaurant, fitness center and rooftop event space.
Adaptive reuse can be a win-win for investors, developers and the respective communities. While we collectively navigate our way through uncertain economic times, Forbix is proud to be part of a solution to remedy one of the critical issues of commercial property vacancies.