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Philly created more than 1,500 apartments out of old buildings as the pandemic raged

Philadelphia kept its status as a top producer of apartments via adaptive reuse in 2020 and 2021, according to a new study.

Aaron Smith, partner at MMPartners LLC, shows the finish on an exposed-brick wall of an apartment under construction at the Poth Brewery building in November 2021, in Philadelphia's Brewerytown section. The Poth Brewery Lofts has started leasing apartments at the former brewery.
Aaron Smith, partner at MMPartners LLC, shows the finish on an exposed-brick wall of an apartment under construction at the Poth Brewery building in November 2021, in Philadelphia's Brewerytown section. The Poth Brewery Lofts has started leasing apartments at the former brewery.Read moreJOSE F. MORENO / Staff Photographer

Since the 1980s, Philadelphia has been known as a top producer of homes in buildings that didn’t used to be homes, and a new study shows this continues to be true.

In 2020 and 2021, developers in Philadelphia repurposed old buildings to create 1,552 apartments, according to an analysis published this month by RentCafe, a national apartment search website. That ranks Philadelphia second in the country for the number of apartments created through the concept known as adaptive reuse. During these years, the city converted just 13 fewer apartments than Washington and 413 more units than Chicago.

Philadelphia’s age, history, and manufacturing past help make it a favorable location for adaptive reuse because it has many old buildings. Developers have transformed factories, warehouses, offices, churches, and schools.

During the first two years of the pandemic, Washington, Philadelphia, and Chicago were responsible for 15% of the nation’s new apartments in buildings converted from other uses.

» READ MORE: Philadelphia is a leader in turning old factories and offices into apartments

Available land for construction of large apartment complexes is limited, especially in dense cities, so finding new uses for old buildings can help cities adjust to changing needs and meet housing demand. And it can preserve history.

Adaptive reuse accelerated in the first two years of the pandemic beyond the pace of the years just before it, especially in the country’s largest cities, according to the RentCafe report, which focuses on buildings with 50 or more apartments.

Nationwide, developers created about 28,000 new rentals through adaptive reuse in 2020 and 2021. In 2018 and 2019, developers created about 22,300 apartments this way.

Nationwide, growth of apartments in repurposed spaces outpaced growth of apartments in newly constructed buildings in 2020 and 2021, according to RentCafe.

Not all unused or underutilized commercial spaces are suited for conversion to homes. Features such as ceiling height and access to natural light can determine if residential reuse is feasible.

But if buildings meet architectural guidelines for residential spaces and developers don’t find many unpleasant surprises in old buildings, apartments in repurposed properties can go to market much faster than units in most newly constructed buildings.

Nationwide, conversions that are currently underway or proposed would result in more than 77,000 apartments in the coming years, mostly in offices, hotels, and factories, according to RentCafe.

The future of office space

Conversions of office buildings into apartments are at an all-time high. Two in five conversions happened at office buildings, the top building type for reuse projects in 2020 and 2021, according to RentCafe. In these years, developers created 11,090 apartments nationwide from former offices. Because more people work from home now than before the pandemic, many offices are underused.

» READ MORE: Former Haddon Township bank could soon be converted from offices to apartments

“Owners of office space are looking to better utilize an existing asset,” said Doug Ressler, manager of business intelligence at the real estate data company Yardi Matrix, sister company to RentCafe. “We’ve seen the creative mindset of people to take office configurations and convert them to residential.”

Philadelphia ranks third among cities in the number of apartments converted from offices.

One City, once the headquarters of United Gas Improvement Co., opened as a 323-unit apartment building in September 2020. The building at 1401 Arch St. used to house Philadelphia County Court’s probation and pretrial divisions and is more than 120 years old.

» READ MORE: Empty offices could cause ‘fiscal doom loop’ in Philly and other big cities

“One City was challenging for a handful of reasons,” said Leo Addimando, cofounder and managing partner of Alterra Property Group, a leader in adaptive reuse in Philadelphia and developer of the project.

It took a couple of years to empty the building of tenants. The building had been renovated and added on to several times in different eras using different types of construction. And it didn’t match available drawings. Accessing the site for deliveries of materials was difficult because of the site’s small back alley and location on a major street corner. And the pandemic delayed the project.

That was all before the apartment building opened. After it did, a pipe burst and caused major flooding. The building lost electrical service, which took eight or nine months to restore, Addimando said.

» READ MORE: Suburban office parks now have millions of square feet of new vacant offices — enough to fill more than 2 Comcast Centers

These are the types of challenges that pop up in developments all the time, he said, but they especially happen in adaptive-reuse projects when developers are working “not on a clean slate, but with an existing building that has its own idiosyncrasies.”

In order for developers to consider repurposing more office buildings, prices of the buildings have to come down, Addimando said. He said he would like to buy an office building or two to convert, but no projects are imminent.

In 2020 and 2021, factories, hotels, and warehouses were the most converted buildings after office buildings.

Over the next several years, at least 1,200 new rental units in 10 repurposed buildings are planned in Philadelphia, according to RentCafe.