Momentum is growing to convert vacant or underutilized commercial properties into residential or mixed-use spaces, as government agencies step in to streamline processes for developers, owners, and facility managers.

Industry experts believe that a U.S. Department of Housing and Urban Development (HUD) research grant for commercial-to-residential conversions could create more job opportunities for facility managers, while easing the burden on frontline operators, boosting productivity, and giving them a seat at the decision-making table.

HUD's Notice of Funding Opportunity (NOFO), announced last week, will provide up to $860,000 to compile case studies of conversion projects completed since the start of the COVID-19 pandemic. The program aims to gain insight into which policy measures, subsidies, and incentives can enhance the economic viability of such conversions.

The housing agency said it plans to develop a resource guide for local agencies and development practitioners. Solomon Greene, HUD's Principal Deputy Assistant Secretary for Policy Development and Research, expects the funding will provide examples of how to best overcome structural and financial obstacles in conversion projects, helping property managers and facility leaders understand measures municipal officials have taken to support such projects since the pandemic.

"This will provide practical guidance and insights for cities to use," Greene said in an email to Facilities Dive. "We hope this research will accelerate solutions to our nation's growing housing supply shortage by drawing on innovative and creative problem-solving around the reuse of existing buildings and assets in communities."

Although states like California have strong demand for Class A facilities and new construction, zoning barriers and outdated permitting processes limit the advancement of adaptive reuse. However, this has not stopped the construction industry from evolving toward adaptive reuse models in an attempt to avoid demolition and full-scale rebuilding.

"Adaptive reuse will be much faster than new construction or even renovation projects," said William Leddy, founding principal of San Francisco-based Leddy Maytum Stacy Architects. "So these buildings can be put into service faster than new projects, which means potential job opportunities for facility managers."

Leddy, who is also vice president of climate action at AIA California, an organization that has pushed for changes to state building codes, believes HUD's program could cut the turnaround time for adaptive reuse projects in half.

"If you're talking about the time needed for design permits for new buildings, demolishing old buildings, or even rebuilding, it's about six years total," he noted. "But if you look at existing buildings and carry out adaptive reuse renovations, approval times could be as short as three years."

Alex Stettinski, CEO of the San Jose Downtown Association and a board member of the International Downtown Association, agrees that the resource guide produced by the grant program could shorten turnaround times.

"If you have a catalog, you can avoid mistakes and replicate opportunities in other projects," he said. "So it could speed up project completion because you have case studies and guidelines—a template to follow. This assumes the submitted case studies are comprehensive and useful."

However, despite the wealth of insights facility managers possess, they may not find it easy without adequate training and retraining. Leddy believes the emergence of complex building management systems in modern and renovated buildings confuses facility managers, who traditionally focus more on repairing, replacing, or upgrading aging or damaged equipment and systems rather than on automation and energy efficiency.

"This is a huge opportunity to educate facility managers about new building management technologies, to make them realize the urgency that the status quo is outdated, and to prepare for the future of high-performance, low-carbon adaptive reuse projects," he said of the grant. "We can no longer keep the lights on all the time. We have to think smarter about resource reuse."

The HUD-funded research is also expected to serve as a springboard for future office-to-residential studies. In the grant notice, HUD stated that research proposals must emphasize how the knowledge and insights generated by the proposed project will enhance understanding of federal, state, or local policies and programs for commercial-to-residential conversions.

Stettinski expects fewer than 100 applicants, most of whom will be architects. Architects, he said, are typically more directly involved in the design elements of conversion projects and the research supporting their decisions.

"I think facility managers are looking for immediate solutions," Stettinski said. "They don't have time to sit down and conduct research on this scale. But architects do. It's their specialty. If architects can find ways to carry out conversions, they serve facility managers by sharing best practices and insights. Architects can use this funding to compile a guide, then go to owners and facility managers and say, 'We've done the research, and here's what we can offer.'"

"Then partnerships can be established among architects, owners, facility leaders, and cities," he added, noting that these alliances can more clearly demonstrate how to best implement adaptive reuse projects.

Although turnaround times may be faster, according to Kate Collignon, a partner at HR&A Advisors, streamlining processes to reduce waiting times for project approvals could impact the economic viability of the adaptive reuse model. "Even in a building with a 30% vacancy rate today, owners need to wait a long time until other leases expire to vacate the rest, so you assume conversion and leasing construction will take two to three years," she said.

On the other hand, she noted, owners could slightly lower rents, seek different tenant types to reflect market changes, or invest more in office space if the value generated is greater than the cash flow that converted residential units might provide.

"So, it's not economically viable right now," she said, referring to San Francisco's initiative inviting proposals to reuse underutilized downtown commercial space.

Both Collignon and Stettinski pointed out that direct incentives from federal, state, or local agencies are needed to make conversion projects a reality.

HUD's new NOFO builds on the Biden administration's vision to promote commercial-to-residential conversions. The White House recently announced that HUD decided to provide up to $10 million in grants to areas facing strong demand for affordable housing. Last month, the U.S. Environmental Protection Agency also said it would launch a $27 billion greenhouse gas reduction fund to mobilize capital and finance commercial-to-residential conversions and cost-saving building renovations, as part of a larger effort to achieve zero-emission goals.

Proposals for the NOFO are due October 12. Interested parties can apply for the grant through the U.S. government portal.