Recording: Can Offices Become Housing?
I chatted with Gensler's Steven Paynter about the challenges and opportunities of Office-to-Residential conversions.
30% of office buildings can be converted into housing.
12 months ago, most cities and landlords didn't want to hear about this possibility. But over the past six months, there has been an explosion of interest.
Office conversions can create hundreds of thousands of new apartments in the heart of cities like New York, San Francisco, London, and Toronto.
Adding new housing stock can make cities more affordable, more equitable, safer — and more fun. Instead of relying on commuters that show up a couple of times a week, cities can enable more people to live near work and within walking distance of schools, shops, parks, theatres, and other urban amenities.
Beyond the benefits for people, it's also good for the planet! Buildings make up a huge proportion of overall carbon emissions. 50% of these emissions are generated during construction. Reusing and repurposing buildings helps drive down emissions dramatically.
And it doesn't end there. By enabling more people to live in cities, we reduce car emissions and energy usage for heating, cooling, and ventilation.
In early 2020 — before the pandemic — Steven Paynter from Gensler started developing an "algorithm" to assess which office buildings can become apartment buildings. Since then, Steven and his team evaluated more than 500 buildings across North America — 50 of which are now being converted.
I chatted with Steven about the challenges and opportunities, and what politicians, investors, and employers can do to make cities more pleasant, affordable, and attractive.
If you prefer audio to video, you can listen to the event on Spotify, Apple Podcasts, and beyond. The full transcript is available below.
[00:01:27] Dror Poleg: Today I'm delighted to have with me Steven Paynter, who is a principal at Gensler. For those of you who are not familiar, Gensler is a global architecture design and planning firm, one of the leading ones in the world, active, I think, most corners of the planet.
[00:01:43] Dror Poleg: And over the past few years, Steven. Found himself busy analyzing the conversion potential of hundreds of office buildings into residential or into other uses. So first of all, Steven, welcome.
[00:01:57] Steven Paynter: Hi thanks for having me. I'm excited to to talk today and excited by the number of people who are already bombing me in the chat.
[00:02:04] Steven Paynter: So I'll
[00:02:05] Dror Poleg: indeed to have a good discuss. So for all of us watching. So I'm gonna start asking my own questions but feel free to drop your questions in the comments section below. I'll try to leave a few minutes at the end to address them and I think it'll be interesting for Steven anyhow to to see what you're interested in and we'll try to address it later as well.
[00:02:23] Dror Poleg: I'll
[00:02:23] Steven Paynter: definitely take a look through them at the end of the session as well, if we don't get to all of the questions. , please feel free to add them.
[00:02:30] Dror Poleg: So let jump straight in. So as I mentioned, Steven, you spent the past few years analyzing hundreds of office buildings to see whether they can be converted into apartments.
[00:02:41] Dror Poleg: What prompted you to do
[00:02:42] Steven Paynter: it was really actually in really early 2020. , we went out to our clients and people were talking about maybe there was a recession. This is before anyone talked about Covid, obviously. And we said to them, what are you worried about? What is happening in the market that we can come in and help with?
[00:02:58] Steven Paynter: And a big response to that question was we're worried about our Class C office buildings, especially in certain markets. And, we did a lot of work in Calgary early on, but in these markets the vacancy in Class C office building was climbing very quickly. And the amount of new class, a product that was coming online was very significant.
[00:03:17] Steven Paynter: A couple of million square feet every. . So they were worried, what do we do with them? And we said why not convert them? And the response we heard was we tried that and it didn't work. And we, it never penciled out at the same time we were actually doing conversion projects that were working.
[00:03:34] Steven Paynter: So it was really to answer that question, what do you do with the buildings and why do , A lot of the developers we talk to say it doesn't work when others are actively doing. . And that led to, two years and 500 buildings that we've been studying ever since. It's
[00:03:47] Dror Poleg: interesting that the trigger was pre covid some kind of feeling of a slowdown in the office market, which is something that I noticed as well and wrote about at the time.
[00:03:56] Dror Poleg: Yeah. I think even two years before Covid, the market was softening and the only thing holding it together was the WeWorks and hotels and VC funded companies that were taking about half. Space in some cities and holding demand stable. But once you look beyond them, and I guess some landlords did, they could see that there is a softening happening.
[00:04:14] Dror Poleg: So when you want to analyze whether a building can be converted, is there a specific methodology? How, where do you begin? How do you go about
[00:04:22] Steven Paynter: that? Yeah, so we actually built a methodology sorry, one second.
[00:04:30] Steven Paynter: Okay. It just popped up that I don't have a battery. Sorry about that. . Yeah we actually built a methodology because we wanted to be able analyze a vast number of buildings and we started this approach in Calgary. The city of Calgary came to us and said, Hey, can you look at 12 million square feet?
[00:04:45] Steven Paynter: And by the way, you have three weeks to. And we're like, okay, so we need a, an approach that isn't doing every single building one at a time and designing layouts. So we build this methodology that looks at the overall building looks at the floor, platelets at the quarter, window depth number of elevators and so on, and then it.
[00:05:02] Steven Paynter: The kind of algorithm behind it scores those factors, puts it into this scorecard and says, look, all things being equal, this building is gonna be more successful con conversion than this one down the street. So we did that for about 12 million square feet in Calgary and we balanced the scoring with developers, with contractors and cost consultants so that we knew what was a good score and what was a bad.
[00:05:24] Steven Paynter: And then since then we've actually rolled it out to well over 500 buildings around mostly North America, some in Europe, some in Asia as well. And that allows us to look at these buildings incredibly quickly or whole cities, which we're doing work for, Calgary, New York, Pittsburgh, a bunch of other cities too.
[00:05:41] Steven Paynter: Or entire portfolios for certain developers too. So there's really that speed that was critical to us, take a month worth of design thinking and condense it. A very short exercise that we could do on mass.
[00:05:55] Dror Poleg: I like the word algorithm here. So how can we automate this or do we still need architects?
[00:06:00] Steven Paynter: No, you absolutely still need architects. And it is what we've built is very simple in a lot of ways. It takes the design thinking of. I as an architect and a des designer know what a well proportioned unit is. I know the right distance from the, the front door into the unit to the window.
[00:06:16] Steven Paynter: And we took that thinking and put it into essentially a spreadsheet or a calculation that could from very simple inputs work out. Say, is it a good proportion? Do you have enough elevators? So it's all of that that work that we would do as design. and that we would spend, ages crunching every single time.
[00:06:35] Steven Paynter: And we just automated that so that it is the same answer every time with the same information, the same inputs, and it gave that consistency that we could then start building learnings from it. . And then once, we now have, as I said, over 500 buildings in there, you can really start to see the trends and the learning and constantly improving.
[00:06:51] Steven Paynter: Of course the scorecard system so that we New good data in there, good data for each city as well. So
[00:06:57] Dror Poleg: I want to pick up a follow up question from the audience, but before that I see a few people say that they can't hear. Make sure you click on the sound button under the video on LinkedIn, cuz I think LinkedIn maybe goes on mute by default.
[00:07:09] Dror Poleg: So there's definitely sound, I know that most of you are hearing us. So I see a question here from, Actually, I can't see the name, but I'll put the question on the screen. So how many data points need to be inputted in, into this type of model?
[00:07:25] Steven Paynter: Yeah, so we have a standard set of about 25 questions that goes into the model.
[00:07:30] Steven Paynter: The information for those questions is always, Pretty readily available. And we did that on purpose. So it's data that we can get from a broker's leasing package or from CoStar or any of the other, public databases. We put that information in floor plate size called a window depth number of elevators, number of parking spaces, all that kind of stuff.
[00:07:49] Steven Paynter: push that data in and it then runs the calculations and exports about 150 pieces of new information, like how many units in the building, what size of those units, how many are on the floor, what's your parking ratio, and so on. But we very intentionally simplified the inputs to information that you could get and that everyone could get for buildings.
[00:08:07] Steven Paynter: So about 20 pieces in. But a good typical floor plate and, a quick Google of the building gives us enough data to then run the analysis. .
[00:08:17] Dror Poleg: So what are some of the main trends you noticed over the past two years? So you mentioned landlords worrying already before Covid, but how did things unfold after that?
[00:08:26] Steven Paynter: Yeah I've been doing this for. two and a half years now. And I've gotta say that honestly, no one cared for the first year and a half. That gave us time to build the system and get it working properly in the last six months. Everyone wants to know, and I think there was, 1500 people signed up today.
[00:08:41] Steven Paynter: It is a huge topic. And that falls into a couple of categories. It's. It's building owners who are suddenly worried that their vacancy is going up and they can't pay down their loans. And it's also cities and we're doing a lot of work with cities specifically to say, how can we incentivize these conversions?
[00:08:57] Steven Paynter: How can we get people back to the downtowns? How can we create mixed use neighborhoods in existing cities that couldn't I've always developed. And so you're starting to see more cities get on board. Calgary has had an incentive program in place for about a year. Chicago just closed their incentive program to applications about two weeks ago.
[00:09:15] Steven Paynter: Eric Adams, the mayor of New York, announced incentives and relaxations on zoning restrictions yesterday or maybe the day before. Yeah. So the movement in the last few months has been in. .
[00:09:29] Dror Poleg: Interesting. So you mentioned a few of the factors you're looking at. I think that, like you, I've been talking about these type of conversions and the need for them for a few years, and the immediate response you always get is oh yeah, it's not possible.
[00:09:41] Dror Poleg: Floor, plates, windows, elevators, cores we often intuitively assume that office buildings are. As apartment buildings. So maybe we'll flip this question on its head and say, are there any characteristics of office buildings that make them particularly good or wonderful for, to become apartments?
[00:09:59] Dror Poleg: And also, what are some of the shortcomings or issues that that keep popping up in your work?
[00:10:04] Steven Paynter: Yeah. So to, to answer the first part that, that question, the reason why people always say that they don't make good conversions is because in the research we've done and all the bills we've analyzed, 70% of the time they don't make good conversions.
[00:10:18] Steven Paynter: So part of the scorecard system that we've developed is actually trying to, so
[00:10:22] Dror Poleg: 77, 0, 70% of the time, they don't make good.
[00:10:26] Steven Paynter: Yeah. So that's why we looked at this approach of just do, being able to do a vast number of. Analysis because then we can find those kind of Goldilocks buildings the top 30% that are making sense.
[00:10:36] Steven Paynter: But that does vary a lot by city. And we are seeing the ones that are really suitable. There's a lot of kind of seventies buildings, a lot of those kind of energy buildings, which had a slightly smaller floor plate that had a good quarter window depth, and they're in a location in the middle of downtown where people, actively want to live.
[00:10:52] Steven Paynter: So those buildings are looking really good. The slightly later ones, the big floor play, eighties, nineties buildings, the suburban campus buildings they're really not working. So both people are right in a kind of strange way. The people who say to you, this never works, it can't happen.
[00:11:09] Steven Paynter: They're right most of the time. And no, but you
[00:11:11] Dror Poleg: say 30% are right too. 30% of buildings that can be convert. That's a lot of buildings. That's a lot of, they look at Manhattan or London,
[00:11:21] Steven Paynter: In Calgary we found of the 12 million square feet of vacancy in the city, we found 3 million square feet that could be converted very easily.
[00:11:28] Steven Paynter: And that's huge, right? And in Calgary, it's gonna increase the downtown population by about 25%. Makes a big difference to the city and to the vibrancy and to the local businesses there that are trying to survive. So it can be a huge impact.
[00:11:42] Dror Poleg: I see a questionnaire from Francois and again, anyone else drop your questions.
[00:11:46] Dror Poleg: I'll try to feature them as well. It's relevant. But if we can pinpoint a few kind of non-starters in terms of conversion stuff, like you said, I can Google the building and often I already know. Yeah. Some
[00:11:57] Steven Paynter: highlights and find it. So flip that question around. Some of the really good things is that from almost every code perspective an office building, An existing office building will outperform what you need for residential.
[00:12:08] Steven Paynter: So the floor loading is higher for office. The mechanical equipment requirements are higher for office, so that does make conversion in a lot of cases very easy. You don't have to upgrade exit stairs or anything like that. On the flip side, the office buildings of very large floor plates and very la very deep quarter window depths, which are actually the ones that people don't like too much.
[00:12:28] Steven Paynter: Those ones are a real challenge. So if you start getting a quarter window depth above about, 50 feet, you'll be really challenged to do the conversion. But that always has to be balanced with positives. Like Is it in a great location? We're doing buildings in downtown Manhattan with a very deep quarter window.
[00:12:44] Steven Paynter: But they're just in a great location. So we're, able to make it work with ONF floor amenities and that kind of thing. So that's really what we're trying to do is always balance the, oh my God, this is a problem with the 10 other great, potentially great aspects. Of the building and the location.
[00:12:58] Dror Poleg: So maybe it'll be good to, if you could take us through one case study or an example project to understand where it began, what it looked like, what it was, and then. What did it become? How long did it take and who, how much pain was involved along the way? ?
[00:13:12] Steven Paynter: Yeah, absolutely. I sent you picture of Franklin Tower earlier.
[00:13:15] Steven Paynter: So this is a real flagship project for for our approach. It's a seventies office building in Philadelphia. and we originally looked at converting about two-thirds of the building to residential and maintaining office. Actually, during the course of the project, it became all residential. This is a great example.
[00:13:33] Steven Paynter: It is incredibly successful as a rental building. Really high occupancy, good rental rates, and it takes advantage of some of the things that offices offer, like higher floor heights, which give great ceilings heights in the residential. It takes advantage of the fact that we are able to reduce the amount of mechanical equipment.
[00:13:49] Steven Paynter: So there's a great rooftop amenity here of a gym and an outside terras and so on, on the roof, but it did have some of the other issues. A deep quarter window depth. And we actually used that to program the middle of each floor plate with on floor amenities and laundry. And it had a very challenged facade, as you can see in the before picture on the left there, we did a complete facade replacement, but that allowed us to do an energy performance upgrade, allowed us to add operable windows and make it, much more appealing.
[00:14:17] Steven Paynter: And then we also pushed in balconies, which you can see on either end in the corner that dealt with the fact that on the ends it was about 60. Caught a window. So we pushed in the balconies that shallowed up units and, provided a desirable amenity for each of those units. So this one really has, a lot of the positive as of the conversion, creating great space in a great location, and some of the negatives that we had to deal with through provision of amenities and balconies and the facade.
[00:14:42] Steven Paynter: But in the end, incredibly success. .
[00:14:43] Dror Poleg: So you mentioned the kind of environmental upgrade over there. I know that a lot of cities, especially, a lot of developers and landlords are very concerned about upcoming or existing regulation about, climate change emissions yeah.
[00:14:56] Dror Poleg: Zero energy usage, et cetera. Have you encountered that as an impactful component in terms of conversions? Does it help, does it hinder ? Does it convince people to give up and try something else? How does that play into this
[00:15:09] Steven Paynter: story? So there's a few really interesting things around that. From every building that you do, about 50% of the carbon produced is during the construction, right?
[00:15:18] Steven Paynter: So what we call embodied carbon, . about 50% is the operation of the building. The lifecycle carbon. Obviously in maintaining these assets, we're able to save all of that embodied carbon or most of it because in the concrete structure that we're keeping, and then we're able to upgrade the facades to reduce the lifecycle carbon too.
[00:15:35] Steven Paynter: So in the scoring that we do, we actually have a, one of the. Criteria is how much embodied carbon is saved. And on average it's about 2 million kilograms per building. That's, huge amount. So that's encouraged some Es g funding and some clients with with strong E es g programs to look at these conversions and invest money into these conversions as well.
[00:15:55] Steven Paynter: And then there's, cities like New York, which has local law 97, which will force people to upgrade their buildings or Right. Pay tax. . So if you're gonna do all that work, if you've gotta re-skin and you've gotta redo the mechanical systems, then developers are coming to us and saying, look, we've gotta empty this building to upgrade it.
[00:16:12] Steven Paynter: So we might as well, look at a conversion as well if you've gotta empty it out. If you've gotta do all that work, why not find the best value for money or the best end use case for it. And we're doing a lot of those studies right now and actually progressing with quite a few buildings in New York for that.
[00:16:25] Dror Poleg: So two interesting point you made there that I want to reiterate. So one, obviously the building that you don't build or you don't have to. Is the most sustainable one? Yeah. And also that the environmental angle can be a source of cheaper capital or kind of more patient capital that has to invest in e s G type initiatives because of its mandate or because of regulations.
[00:16:46] Dror Poleg: And I know in Canada, a lot of the larger pension funds that own a lot of the real estate are very big on that front. , you might find that you get cheaper capital than you expected for these type of conversions, which again, means that they might pencil even though you would assume that they wouldn't.
[00:16:58] Dror Poleg: Yeah. I want to pick up a few questions from the audience before I come back to maybe another one or two from me. So how do you evaluate types and numbers of units? So in terms of figuring out, one bedroom, two bedroom, et cetera. Yeah. Does, do these type of conversions mean you have a little less leeway in terms of how you adapt to the market, or it hasn't been an issue?
[00:17:21] Steven Paynter: Yeah, so in the initial scoring or in the initial analysis that we do we plug in the average unit size that either the client wants or if they're not sure the average unit size that's most desirable in that market, and that changes a lot by location. In Toronto, where I am, the average unit size is just under 500 square.
[00:17:40] Steven Paynter: You go to parts of the US, the average unit size is 1200. And obviously that makes a huge difference to how the floor plate works. So we use that in that first pass analysis and the scoring will say, okay, this is gonna be really flexible and. The units will work or not. And then once we find the good buildings, those kind of Goldilocks buildings, we do a deep dive on how you plan out the units, how they would really function on the floor.
[00:18:03] Steven Paynter: And that is honestly the biggest challenge. Can you get units in there that people are really gonna like? And that's critical to the success of any residential projects, right? Especially rental. And we're doing a lot of rental buildings. . You gotta have people walk in five years after this thing is built and be like, great.
[00:18:20] Steven Paynter: I'm gonna pay you top health. Yeah, I'll take Yeah. E exactly. So units are critical and that that size of the floor plate, the depth of the floor plate is, , really important to working that out. But having said that, you'll find sorry. Yeah. You'll find buildings like Franklin Tower and some of the ones we're doing in Calgary and in Houston that just have this, by chance almost have this perfect floor plate, someone design them with, or if he caught a window and you lay it out of units and you can get two beds and one beds and studios and it.
[00:18:48] Steven Paynter: ideal. Every time we find one of those in the studies that we do, the clients are thrilled, and we're thrilled as well.
[00:18:56] Dror Poleg: Yeah. Related to this question from Tim, so can, assuming it doesn't work for residential, if you encountered any projects where you actually ended up fitting it into, for storage, cloud, kitchens, logistics, gyms, healthcare, anything.
[00:19:10] Steven Paynter: Yeah, so we've actually done a lot of studies on these and we're starting to look at again, a conversion to long-term care healthcare. Type buildings. The main issues that we've run into for conversion to lab, which is a question we get asked a lot, conversion to storage and so on, is that the floor loading for an office building while higher than the requirement for residential is a lot lower than it is.
[00:19:33] Steven Paynter: For lab, for healthcare, for storage. So then you have to start getting into real major structural upgrades of the building. We've also found with, the ghost kitchens and last mile delivery and so on, that a lot of these. buildings, especially the ones that aren't totally desirable, do not have good road and transit connections to get to them.
[00:19:53] Steven Paynter: . So you might have, one small loading dock at the back that's just not gonna work for storage. So we are actively looking at that and see how we can make those upgrades. There's a lot more challenging. The residential conversion is by far the easiest. . And then we're also studying and we've, got some wire papers on this and some projects going ahead.
[00:20:11] Steven Paynter: the studying of conversion of the parking above grade or below grade to those uses, and that is a lot easier. So conversion of parking to storage conversion of parking to ghost kitchens. And even the conversion of above grade parking to residential or to open plan office has been been pretty successful as well.
[00:20:30] Steven Paynter: But the reason we focused on residential is that there is in these cities that have housing crisis and have too much. And have a desire for safer, more vibrant mixed use neighborhoods. The market is there and the, it's really, really moving. We're seeing, we've analyzed 500 cement buildings now.
[00:20:47] Steven Paynter: There's over 50 of them going ahead into real projects. Wow. So I'm already very busy. So and our teams are working hard on these. So that's where we've been focusing on our energy.
[00:20:58] Dror Poleg: All right. Makes sense. I think politically also for cities, the priorities. To have more housing that is more affordable
[00:21:05] Steven Paynter: and Yeah.
[00:21:06] Steven Paynter: And it, it's not just that, it's more housing, it's better affordability, but we know from the development of brand new mixed use neighborhoods, that more people means less crime. It means better, successful local businesses too. So it'd be a shame, in my opinion, to convert these things to storage and then just kill the neighborhoods.
[00:21:24] Steven Paynter: This is about neighborhood development as much as. . Yeah,
[00:21:27] Dror Poleg: I agree. So Julia is asking, I know that architects don't like to worry about things involving other people's money and economic visibility, but from your experience, any kind of highlights on the cost differences between converting and building new, is it more expensive but better?
[00:21:43] Dror Poleg: Is it cheaper?
[00:21:44] Steven Paynter: Yeah. So in, in the ones we've costed out so far, it's working out about 30% cheap. Than demolishing and rebuilding a new building. So it really makes a lot of sense in cities where the downtown is already constrained, New York, Chicago Toronto for example, where there's not good, perfectly unencumbered, new construction sites.
[00:22:04] Steven Paynter: It's really making a lot of sense and the costing does vary, but as we've been through this, we know that, once we're confident in the score of the building and in how it lay, That the costs will end up being less. And we're also doing a lot of work to get cost certainty. So one of the things we've been doing for every project is a deep dive on, once we've selected a deep dive on the existing building infrastructure, we're pulling drawings from the city archives for the original construction.
[00:22:31] Steven Paynter: So we know what's there. We know how the structure works, we know where everything is, and we're fully virtually building those in 3d. so that you don't get those surprises on site. When we do the construction, that's really helping reduce the cost and reduce the risk for clients that we're working with.
[00:22:47] Steven Paynter: So it's a little bit, it is a little bit cheaper, but you've really gotta do the due diligence and you gotta have the right people on board to make sure you don't get stung with surprise costs later
[00:22:56] Dror Poleg: on. That makes sense. Thinking ahead, obviously it's good that we're able to adapt some of the existing.
[00:23:05] Dror Poleg: Supply. And I think we're used to doing that every 50 or 80 years or so in, in cities. However, my hunch is that, the kind of new status quo is not something that is going to last for too long either. Definitely not 80 or a hundred years. Yeah. So when we design apartment buildings today, or office buildings today, when we build.
[00:23:27] Dror Poleg: What can we do to make sure that they're easier to adapt in the future? If
[00:23:30] Steven Paynter: anything that's a, it's a really good question and you asked different people, you're gonna get a different answer. So I'll tell you my response. The buildings that we are looking to convert right now, which make good.
[00:23:44] Steven Paynter: Candidates for conversion to residential are the ones that nobody wants to be in, and they don't wanna be in them cuz they have lower ceilings or they're they're dark or they don't have the, the right proportion of floor plate space. If we were going to go and design a new office building that was perfect for office, but perfect for residential and perfect for hotel, it really wouldn't be good for any of them.
[00:24:04] Steven Paynter: Yeah. And we're finding that so much on the, if a building's 80%, 90% vacant, It'll make a good conversion to residential cause no one liked it as office and we haven't really found that kind of goldilock sweet spot of perfect for all things. So as we go through these cycles, as you said conversions have happened before for different types of buildings.
[00:24:24] Steven Paynter: It's really about building new. modern workspace that's fit for people right now that gives 'em the amenities and gives them the kind of spaces they like. And then taking the older ones out of stock because they aren't what people want anymore. I used to live in a converted loft that was once a factory and it was converted from a factory to office and then office to residential and building was, 120 years old, something like that.
[00:24:47] Steven Paynter: We're gonna be doing that with these older buildings. If you imagine what the world was like in 1970 when a lot of these buildings were. Pre-internet, pre-open office, pre all of those things. They just don't work for office anymore. So let's build the new stock, convert the old stock, and then really just continue that cycle.
[00:25:03] Steven Paynter: It's good for the neighborhoods to have that churn, and it's good for from a sustainability point view as well. .
[00:25:09] Dror Poleg: Yeah. So as a final question, I see that a few people asked about that. I see this question from Anna and from Lisa here. I think, and there's a few others that are similar. You mentioned how good this is for cities, right?
[00:25:20] Dror Poleg: We make them more vibrant, we make them more affordable. We create mixed use so people can access more services. It's more lively, it's more safe. It's good for everyone. One word that we haven't mentioned yet today is zoning and kind of planning regulations more broadly. And to expand that even further, to close off, what can cities do to incentivize and enable.
[00:25:43] Dror Poleg: More of these conversions and more dynamism in general based on your, yeah.
[00:25:48] Steven Paynter: So I'll give you a couple of examples. City of Calgary, who has one of the first cities that we worked with on this, they took all the zoning requirements out of the way. They said if you've got an office building and you want to convert it, as long as you don't make it bigger, you can just do it.
[00:26:02] Steven Paynter: No zoning ICUs at all. They also then incentivized these conversions to happen at $75 a square foot. Of tax money going into them. That is the sweet spot of encouraging these things to happen. Some incentive money removal of the red tape. We're actually working with over a dozen cities now to help them build similar programs or similar approaches to a greater or lesser extent in terms of incentives.
[00:26:26] Steven Paynter: And then you're seeing cities like New York who are coming in and saying, actually, it was announced last week if the building was built prior to 1990, we're gonna take the zoning restrictions out of the way. So that's a big thing. Every time you add a zoning restriction, it adds time to the project that adds cost to the project.
[00:26:44] Steven Paynter: Is it cost of money spent not achieving anything. So we are directly working with cities to actually remove those incumbents and increase the viability, and increase the ease of these projects happening. Cause I think everyone agrees that they're good for the downtowns and they're good for the people as well.
[00:26:59] Steven Paynter: And it's great cuz it takes those CBDs and makes them not just office monocultures, they become. Completely new. Yeah. Like
[00:27:05] Dror Poleg: real cities. To expand the question a little bit, cuz I know that a lot in the audience are, they're investors, they're developers, they're operators, they're larger employers.
[00:27:15] Dror Poleg: What can the rest of us do to enable more of this dynamism? .
[00:27:18] Steven Paynter: Yeah. I think it's really being open to it and being honest about where the, your current office assets are going. When I said that two years ago, I was talking about this and no one was interested. It, a little bit of that was because the owners were in denial.
[00:27:32] Steven Paynter: They thought it was gonna bounce back and it was gonna be the trends that we're seeing and the, the raw data, Avis and Young have this great ability to track cell phone data of where people are in buildings, right? The ones that are bouncing back are the really high quality buildings that are, that people want to be in and enjoy being in, and are right on transit.
[00:27:50] Steven Paynter: Easy to get to easy to commute to. So being honest about what's happening with the other assets and with the vacancy rates there and with their, real, really their resilience to come back and how many people are in those offices is critical. So taking an honest look at them at the future of them, and then, being open to the discussion.
[00:28:07] Steven Paynter: Is it residential? Is it a tear down? Does it have another use? What are we gonna do? And. really digging into it, and that's what we've been doing for the last two years, is having those honest and sometimes very awkward discussions about how much the building's really worth and what its future is.
[00:28:24] Steven Paynter: Yeah. And then, seeing how we can help make a successful project out of it.
[00:28:28] Dror Poleg: Yeah. Music to my ears. In my book I wrote about the five stages of real estate grief. There's and it starts with denial, and then the kind of like anger, trying to force people back, bargaining, saying, okay, maybe three days, maybe four days, and gradually saying, okay, maybe a lot of this talk actually needs, yeah.
[00:28:43] Dror Poleg: That the
[00:28:44] Steven Paynter: five stage of grief is so true because, some time ago we were seeing people saying no I paid, 200 bucks a square foot. This for this building. That's what it's. And it's it's 80% vacant. I really don't think that's what it's worth. And then, six months later they'll come back to us and say, oh, we, we had to write down the book value.
[00:29:01] Steven Paynter: Let's do this. Let's make a project happen. So yeah, it is, there is. Various stages, songs as I don't get the people when they're in that kind of anger phase coming to my door,
[00:29:11] Dror Poleg: Then it's all good. Yeah. I think we brisk through most stages and I think mo most the market is forcing more and more people to really con contend with reality.
[00:29:20] Dror Poleg: Yeah. Most. Steven, thank you so much. This was super insightful. I know there's plenty more questions and I see hundreds of people that want to connect with you here. For those who want to stay in touch with Steven, you can follow him or connect with him On LinkedIn, there's the full link, but probably since you're on LinkedIn already, just type the name and you'll find him.
[00:29:37] Dror Poleg: Me, you can follow on Twitter or on LinkedIn. You can also subscribe on my website, DrorPoleg.com. And for those now or later that are asking about the recording, it'll be available exactly in the same link. So you can share this event with your friends or with yourself and rewatch it exactly where we broadcast it before.
[00:29:57] Dror Poleg: Thank you again everyone for your time and we'll see you soon. Thank you so
[00:30:02] Steven Paynter: much. Thanks for all the good questions too.