The office conversion question

Pittsburgh’s “leaders” might want to call on Kyle Bass before they further proceed with any kind of taxpayer-assisted conversion of older office building space to apartments.

Bass, the founder of Hayman Capital of Dallas, says it simply won’t work.

In a recent spot-on story by Shelly Hagan of Bloomberg News, Bass advises that the better option would be to tear down such buildings. But we would advise that that not be subsidized by taxpayers either.

The story is well-told: Office vacancy rates have remained stubbornly high since the pandemic altered traditional work habits. In some places, such as Pittsburgh, those high rates pre-dated the pandemic.

And while some have recognized office occupancy rates might never return to traditional levels, their “solution” – converting such space to apartments – might be no solution at all.

In fact, it could prove to be the latest in a long line of “renaissance” plans for long moribund downtowns that end in disaster.

Simply put, Bass told Bloomberg that it’s impractical to convert the vast majority of offices into housing.

“You have to jackhammer rebar and concrete. You have to re-plumb everything,” he says. “And when you finish it, it just doesn’t feel right. You wouldn’t want to live there,” citing, among other things, a lack of light in too many floor plans.

And, again as we’ve noted herein prior, a default position of pumping public dollars into such conversions to create so-called “affordable housing – and, in Pittsburgh’s case, coupled with the flagging fortunes of the Downtown area in general – could be a disaster no less than government-created and taxpayer-subsidized slums.

Back to Bass. He tells Bloomberg that older office buildings in downtowns that have become underutilized and, in his view, likely will continue to be eschewed by businesses, is “one asset class that just has to get redone, and redone meaning demolished.”

But as we noted at the outset, just as office space conversion to housing is not the function of taxpayers, neither should they be turned into forced venture capitalists to tear down such structures and build anew.

That must remain a function of the free market. Period.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).