June 22, 2023 | less than a minute read

Is Office to Industrial Conversion Really a "Trend"?

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Daniel Weede

Partner

Get in touch

Daniel Weede

Partner

It's no secret that office development is facing real headwinds and many developers are opting to convert or repurpose suburban office properties into residential and mixed-use projects; however, does it really make sense to convert office to industrial? Given the demanding floor loads, ceiling heights, and truck loading requirements of modern industrial developments (to say nothing of the growing backlash against new warehouse development) it's hard to see this "trend" extending past offices that were themselves once converted to office from old industrial space. While converting office to industrial may not be a trend, given the reduced demand for office space, we should expect office conversions to multi-family residential, medical office, and life science to continue.

“In general, (converting to) industrial tends to be a lower per-square-foot cost than residential,” she said, “given that there are all those added bathrooms and other components. Industrial, for lack of a better term, is a giant box.” For commercial real estate, it’s the reversal of a trend that dominated the 1990s and the early 21st century: conversion of old, seemingly obsolete industrial buildings into offices to house mainly cutting-edge technology and creative TAMI industries (technology, advertising, media and information). In New York, the former Port Authority building on Eighth Avenue in Manhattan’s Chelsea neighborhood and the Starrett-Lehigh building on West 26th Street near the Hudson River, both vast industrial storage buildings, were repositioned and now house Google and a variety of creative companies, including Ralph Lauren.