M3_ Fusion & Floorplate

8/13/20232 min read

Pay attention to the floorplate argument. I hypothesised conversions in April of 2020 memo 2. In the years since I became a lead investor in an interior design company and met and developed relationships with general contractors and developers. In many cases it is actually both more practical and cost effective to demolish the aging structure. In addition, unless there is significant vacancy in the building and or leases coming to an end, a building that has a favorable floorplate could not be considered. In short, there is no way out of this without rethinking the way we use buildings and then start rebuilding.

Churchill said 'We shape our buildings; thereafter they shape us.' Surely, a man who led a nation through to the right side of history and whose mother was from Brooklyn can inspire a complete rethink of the event horizon where capitalism cashes out into comfort. They used to be called stars, trophies. Man made fusion built ever higher and brighter as if we are actually trying to install them into our night sky. Now, like most of life's troubles, they've been reduced to an acronym, HHBs. Hardest Hit Buildings.

"Cities contending with less tax revenue from falling property values and fewer downtown office workers are looking for solutions. While some are urging employers to require that workers return to the office, others plan to transform their traditional business districts into attractive mixed-use centers by offering incentives to convert poorly performing office buildings to other uses, such as apartments. Although conversion activity has accelerated since the pandemic, project completions since 2016 account for less than 2% of the total U.S. office inventory. The high cost of both acquiring and converting a building has limited the viability of such projects. Beyond cost, the general size of office building floorplates may not be conducive to apartment conversion—the ideal floorplate for which is less than 20,000 sq. ft.3 Less than 23% of HHBs have floorplates of that size. It becomes more difficult and cost-prohibitive to convert office buildings with larger floorplates to residential ones."

Read the full report from CBRE here