Pittsburgh has upped its ante in what we’ll call a “gush rush” to convert unused Downtown office space into housing.
As the Tribune-Review reported last week:
“A zoning change approved … by Pittsburgh City Council will streamline the process to convert existing Downtown office space into residential units, officials said.
“The legislation, unanimously approved … will allow proposed residential projects in the Golden Triangle area to move ahead without being reviewed and approved by the Planning Commission, as had previously been required.
“The zoning change also nixed the existing minimum lot size requirement per residential unit.”
As the Trib further notes:
“This comes as city officials have partnered with the county and state for a $9 million residential conversion pilot program that aims to revitalize Downtown office buildings that have sat largely empty since the COVID-19 pandemic spurred a shift to remote work. The pilot program will aim to revitalize those empty offices by converting them into housing.”
Advocates for such a program have been gushing about it as a twofer commonsense solution to a general lack of housing, “affordable” and otherwise, and as a way to keep Downtown “vibrant,” or at least from collapsing further.
Modern downtowns must rush to further up their mix of residential to retail to survive, we are told. With all due apologies to the Beach Boys, we must catch the wave so we’re sitting on top of the world, so to speak.
But what if this prescription is exactly wrong?
It was back in April that a trio of researchers from Moody’s Analytics concluded – based on a New York City case study but, extrapolated, applicable to downtowns in general — that office-to-apartment conversions likely are “a fringe trend at best.”
“Contrary to hints of a conversion wave, it’s much easier to theorize about office-to-residential conversions than to execute and profit on them,” the Moody’s researchers concluded. “In our analysis, in addition to substantial physical impediments to office-to-apartment conversion, office values and rents would have to drop much further for the trend to become more than anecdotal.”
Here’s the researchers’ bottom line:
“The office-to-apartment conversion trend will likely be a minor one, unless office values and rents see some major, permanent decline after the pandemic.
“Finding an obsolete office building at the right price and asking rents, with high vacancy and the right floor plates to convert into an apartment building is great in theory, but very hard to execute in today’s market,” the Moody’s scholars conclude.
Of course, this won’t stop those who firmly believe this trend is here, now and very big. And it must be capitalized upon “for the common good,” goes the mantra.
And just as of course, it’s easy to shill for such things when you have government officials all too willing to pledge taxpayer dollars to socialize what turns out to be the very high risk of such projects – projects that, in the final analysis, don’t make economic sense.
Sound public policy this is not.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
