Office to apartments lure in more instos

Oksana Patron

18 April 2023

An increase in the number of CBD offices converted into residential dwellings is expected to attract the country’s largest institutional investors over the next few years as redeveloped dwellings are ultimately focussed on yield.

With premiers and mayors looking for the new ways to revive the under-utilised office spaces, according to James Alexander-Hatziplis, a co-founder and chief executive of PLACE Studio, many commercial buildings were ‘ideal candidates’ for conversions to high end residential product.

“There are specialist turnaround techniques to change old office buildings into successful residential complexes and apartments that people will want to invest, own, and live in,” he said.

On top of that, an important element that institutional investors need to be aware of is whether the redesigned and developed dwellings are ultimately focussed on yield.

The demise of some of these offices was the result of business tenants seeking to reduce costs as inflation and interest rates rose and were reducing the amount of office space as a means to reduce their expenses.

However, Alexander-Hatziplis stressed that not all commercial and office buildings could be converted into residential stock and some would be better as mixed-use buildings, buildings that house homes, co-working, semi-retail offerings such as food and beverage, boutique commercial – all in the same building.

“This provides a diversified property asset that can withstand falls in one sector alone,” he added.

“This is one reason why commercial buildings converted into such residential mixed-use premises are in greater demand than standard office to apartment projects.

“Also, the commercial assets can come into the market faster, cheaper and with a higher yield. Pair this with the ability to sell off components of the building at a higher yield – typically 2.5 – 4.5% for residential versus 5 -7% for commercial.”