Can California’s empty commercial space be turned into housing?

SAN DIEGO (KGTV) – Now that California has reopened, some employees are returning to the office. So the days of empty desks and buildings could be over – right?

It’s hard to believe that so many people were just sent home to work in March 2020. Office space went from overcrowded to sparse. That should be temporary.

“I don’t think anyone expected this to be such a long event,” said Tim Olson, JLL senior managing director and market leader in San Diego. JLL is one of the largest commercial real estate companies in the world.

“I think by and large the office is not dead. I think through COVID we heard that people would ever go back to work, right, and I think the answer is yes,” added Olson.

According to her research in the San Diego area, tenant demand and rents are showing signs of recovery as the economy reopens. New buildings and biotech conversions drove the average asking rents to a new level. And the return of workers to work is correlated with an increase in letting activity and a decrease in sublet space.

California is still a place to do business and trade in person. But these are not all buildings.

Right now, California lawmakers are looking for ways to take and use vacant commercial space to fill the state’s housing gap. One idea would be to build new apartment buildings on commercial properties that have already been developed.

“Perhaps in a case where it is an antiquated office building that can be converted into a condominium, that would be a unique result. Rather, I think it would be the land under this commercial property where there is a new entitlement or an upzone. “Said Olson.

The idea isn’t too far-fetched. ABC 10News’ sister station in Tucson spoke to a commercial real estate company who had this mindset: “I have a client who is considering the idea of ​​converting an empty office property, over 100,000 square feet of significant land, a large campus area. So look at how that might convert and try to get the numbers working. “

For the time being, that would be the exception, not the rule.

Does the state have to come up with something? Yes. With many businesses moving from home to hybrid businesses to facilitate re-entry, the data shows that the days of empty spaces may be numbered.

“I think the commercial market will stay what it is. We have time to recover from Covid – certain markets are doing better than others, but in large part we will see a return in office demand, ”said Olson.

The information from JLL shows that not every place is created equal. While Los Angeles is seeing growth in the commercial real estate market, San Francisco is not. The office vacancy rate in San Francisco is now over 20%, the highest in the Bay Area and the highest since 2003 after the “Dot-Com” bankruptcy.