More living space through conversion?

Not every office building is suitable for residential use

The first thing to consider is the building’s structure. Office buildings were designed for different workflows and space requirements than residential properties. Large building depths, long corridors or open-plan office spaces cannot always be sensibly divided into flats.

Residential spaces require sufficient natural light, suitable layouts, kitchens and bathrooms. This also changes the requirements for the technical infrastructure. Water and waste water pipes must be accessible in different locations, and additional service shafts are often required. Fire safety, escape routes, sound insulation and energy efficiency requirements must also be assessed for the new use.

The more extensive the alterations required to the existing building, the more a conversion begins to resemble a comprehensive property development project.

Planning law plays a decisive role

Even a technically suitable building cannot automatically be converted into flats. Larger office properties in particular are often situated in locations where planning law has not yet permitted residential use, or has only permitted it to a limited extent.

It should therefore be clarified at an early stage whether residential use is eligible for planning permission and which procedures are required. A protracted process to amend planning regulations can make a conversion that initially seems plausible significantly less attractive from a financial perspective.

The financial calculation remains decisive

For owners, what ultimately matters is the cost of the conversion and the subsequent value of the property.

This is not solely a matter of construction costs. Other relevant factors include the existing book value, potential income from re-letting as office space, the duration of the conversion and the risk of protracted planning approval procedures. Even a technically feasible project is therefore not necessarily an economically viable one.

This is where the new federal funding scheme comes in. The KfW Programme 266 ‘Commercial to Residential’ grants 30 per cent of eligible costs up to a maximum of 30,000 euros per new residential unit created. Where there are several flats, the grant is generally capped at 300,000 euros. Funding is available for the conversion of heated non-residential buildings or parts thereof, provided this is combined with energy-efficiency refurbishment.

The funding therefore does not alter the fundamental suitability of a building. However, it can tip the balance in favour of projects whose cost calculations have so far fallen just short of being viable.

Berlin shows what is possible

One example in Berlin is the former GESOBAU headquarters on Wilhelmsruher Damm. The former administrative building has been converted into 66 rental flats and new commercial premises.

Such projects demonstrate the potential of the existing building stock, but also explain why there has not yet been a widespread wave of conversions. Every building has its own specific circumstances. For some properties, traditional residential use makes sense, whilst for others, serviced flats or other operator-led concepts are more suitable.

For owners, therefore, the abstract question of whether office space can be converted into flats is of less value. It is more interesting to consider whether their own building meets the necessary conditions.

The new funding scheme improves the starting point. Whilst it cannot turn an unsuitable property into a residential building, it can help to re-evaluate potential that was previously considered uneconomical.