Vacant Dallas office space converted to residential use for housing demand

The equivalent of one out of five office buildings is vacant in Dallas and property owners see conversion to residential as a way to shift for changing demand.

Some workers have been called back to the office but demand for office space is still much lower than before the COVID-19 pandemic.

One example of the conversion opportunity is the bright new luxury rental home with three bedrooms, new bathrooms and a nice kitchen in what used to be a corner office on the 18^th floor of a downtown Dallas high-rise owned by Pacific Elm Properties.

“We're very proud of this,” Pacific Elm CEO Jonas Woods said.

The building is the Santander Tower, one of three central business district high-rises where Pacific Elm plans residential units and hotel rooms to mix with remaining office space.

Office demand is weak but demand for housing is still growing in Dallas.

“We're trying to meet that demand with what we view as excess vacant office space in the towers that we own,” Woods said. “The finishes that we’re providing are certainly on par with the luxury residential buildings that are being produced in Uptown.”

Conversion of old office buildings has been underway for years in Dallas.  At one time, Dallas led the nation with 40 vacant old buildings.

The largest was the former First National Bank Building, once the tallest structure west of the Mississippi River.

Now called The National, it has a first-class hotel, apartments, restaurants from fast food to gourmet along with offices, including the headquarters for Downtown Dallas INC, the central business district booster group.

“Not everybody wants to live in the suburbs. They don't want a house with a yard and all that maintenance, DDI CEO Jennifer Scripps said. “I always say we don’t have a healthy body without a healthy heart and we see downtown as the heart of the region.”

Scripps said past conversions have helped grow the downtown population to around 15,000 people who support businesses 7 days a week.

The change now is conversion of space in the big 1980’s skyscrapers that had been filled with office tenants in the past.

“It’s as authentic a mixed-use neighborhood as Texas has or Dallas has,” Woods said. “You look out the windows and the views are pretty incredible.”

Tanya Shuford moved to downtown Dallas from Baltimore.

“I love living in the city. I think downtown is convenient. It has a lot of restaurants. I haven't gone to them all yet, but I plan on going to some of them,” she said.

But Shuford said downtown Dallas needs more than just luxury living.

“Some people can't afford that,” Shuford.

Scripps said more affordable units are also a DDI priority.

“We know we need workforce housing to put in that mix,” she said.

Woods said refitting older buildings for residential use is expensive.

“Installing bathrooms and kitchens every thousand square feet, that’s a pretty intensive conversion effort and certainly more complicated than building out office space,” he said. “It’s a good investment on a case-by-case basis.”

Woods said many other Dallas buildings could be candidates for office conversion but support from the city and federal government would be helpful.

“There’s no doubt that there is an opportunity to get some workforce housing at various levels,” Woods said.

The Biden Administration has told multiple federal agencies to help support more office conversion for affordable housing.