Office to residential conversion is the business of turning commercial spaces into residential, so people live there instead of doing business.
We woke up to news on Monday that Growthpoint was turning the Riverwoods office park in Bedfordview into apartments. Growthpoint did not even bother to break out this property’s vacancy rates in their last two annual reports with the consensus being that it is “almost empty”. This moved surprised nobody as the writing has been on the wall for a long time. Growthpoint has previously said that “new developments (are) ‘on hold’ for a number of reasons, including lack of tenants”. They roped in two partners while they plan to convert Riverwoods into apartments and then “exit its investment in it” mostly likely to share the risk and because it was worth less than market in its current configuration.
South Africa’s economy is slowing, people are working from home and very few investors are risking their money to fund new businesses. With South Africa soon to adopt a free money universal basic income there will no longer be need to work in any case. With millions of illegal immigrants in SA, and locals breeding like rabbits there will also need be a need for residential accommodation – even if it is 30 people in a house like we are seeing with the border jumpers (the irony that they never fled Rhodesia like this is not lost on me).
Finding the right building
For the first time owner starting out, it is important to think ahead. The current and future situation has to be planned for. How I go about is I watch a few buildings and see how the price drops over time. Here in Cape Town prices are still crazy and large building owners have delusions that they will get a buyer. The days of large Frame style businesses in SA are long gone. There are a few office and retail blocks on major roads close to amenities that were on the selling block. To give you an example here in Cape Town northern suburbs, there was the RCS building, Trans Hex building, former Old Mutual building, Master Tyre (these jokers want R26 mil in Parow), apparently there was little use ADT building after Fidelity bought them and the MWEB building also should be converted if you ask me.
The building has to be easy to convert, if not for rental then for sectional ownership or as cheap hotel as a last resort (By cheap hotel I don’t mean low standard I mean less than the R1500 a night minimum currently charged).
It is important to find a building suitable for conversion. There musn’t be a story of having to knock down a lot of walls (which might be central supports or load bearing walls). In the Riverwoods matter the plan is that the six two-storey buildings will be turned into “250-plus studio, one- and two-bedroom apartments. These will include serviced long- and short-stay residential units in a hotel and residential sectional title units”. They reckon “Riverwoods requires little alteration and no additional development bulk to become someone’s home”.
My move is as follows all over the world. I usually look for a small three story mix use building to use as a base: bottom retail/commercial, center office and top accommodation. I set up shop in one of each and rent out the rest. You can use this playbook as the following:
You get an office block, turn the bottom into commercial places that serve the tenants and surrounding area: laundry, convenience store, coffee shop, maybe barber and/or hairdresser. In future there will be schools in such places as well. If you want to have a office component make it a shared workspace, I tell you why when new people come just slot them in. A lot of businesses are failing so don’t cater specially for one or two businesses.
But most important of all is the residential aspect. The way I prefer to do things is build on (or rather leave) an open-plan space (enter kitchen is on right, bathroom on left and it stretches to the bedroom and if there is a balcony) and then I use drywall partitioning/Rhino board to give the room some privacy so it don’t look like a fish tank.
Hopefully you can find an office block with open plan offices, like classrooms in schools. Luckily most use hellish cubicles for partitioning or other temporary partitioning like those shitty room dividers. So you can be in luck if you can get a row of offices to turn into Balwin style human fishtanks: