Behind the scenes: Achieving CRE conversion success

Before speaking at CRE Conversions on October 29 at The Union League Club, NYC, some speakers share essential insights on not just navigating the CRE Conversion landscape, but how to achieve success in this space. Hurry, you can still register to join these industry leaders onsite!

Andrew Till, Chief Operating Officer and Principal, Baron Property Group

1. What types of commercial properties do you see as most viable for conversion in today's market—and why? It's not the types of properties that should be the focus but the configuration/dimensions of these properties. If you find an office building, a former school etc, the question is the efficiency and can you fit residential units.

2. What are the biggest technical or structural challenges you've encountered in conversion projects, and how have you addressed them? Biggest challenges, noting that the dimensions of the building work for residential units, are what the structure looks like after demolition. We mitigate this by x-raying the slabs and doing invasive testing during due diligence. We don't want to walk into a situation where the slabs are collapsing after demo. We have had that before and had to reinforce the building with steel. Not fun.

3. How are zoning laws and permitting processes impacting the feasibility of CRE conversions in your region? Are there any recent policy changes that have helped or hindered progress? In New York, the government is pushing hard to get old office buildings converted. So they are on the side of development. There is a new tax abatement targeting conversions.

4. From a financial standpoint, what creative capital structures or financing strategies are proving most effective for conversion projects? Always good to find an owner of these buildings who will take the ride with you on the development by using their land basis as equity.

5. How do you assess the ROI potential of a conversion project versus ground-up development or traditional repositioning? You need to underwrite a much higher ROI with these types of projects as you are bound to have issues that would eat into that return. A lot of uncertainty on conditions etc = change orders!!!

6. What role are ESG considerations (sustainability, energy efficiency, community impact) playing in your conversion strategy or investor decision-making? Can't answer as we don't focus on ESG or have foreign investors.

7. Are you seeing increased demand for specific end uses—such as residential, life sciences, hospitality, or mixed-use—in converted properties? What's driving that demand? Residential as there is a housing shortage.

8. How do you evaluate market demand and tenant preferences when deciding whether to pursue a conversion? Are there data sources or tools you rely on? Really start by focusing on efficiency/marketability of units to see if they will fit in the proposed conversion.

9. What cities or regions are leading the way in CRE conversions, and what lessons can be learned from their approach? New York has to be #1.

10. Looking ahead to 2026, what trends or innovations do you think will shape the next wave of CRE conversions? I think about that one and hopefully have some good feedback for the conference.

Sam Cummings, Managing Partner, CWD Real Estate Investment

1. What types of commercial properties do you see as most viable for conversion in today's market—and why? In my recent experience, we are doing the most conversion work on older urban office buildings—we are doing two that are late 19th century and one that is mid-twentieth. In these cases, the floor plates are large enough to double load and have enough peripheral transparency to facilitate income-generating space on the perimeters. The plates are small enough that they don't have too much "core". They are also the most attractive to state and local incentives in Michigan.

2. What are the biggest technical or structural challenges you've encountered in conversion projects, and how have you addressed them? MEP is the greatest. If the above conditions make it viable. We have had to adapt HVAC systems. In some cases utilizing existing building systems for heat and adding condensing units for cooling. In a recent case, we have had to "build the plane while flying it" as we converted upper floors while keeping the lower floors in service.

3. How are zoning laws and permitting processes impacting the feasibility of CRE conversions in your region? Are there any recent policy changes that have helped or hindered progress? So far, all we have needed are building permits as the conversions have been allowed in the districts where we are undertaking them.

4. From a financial standpoint, what creative capital structures or financing strategies are proving most effective for conversion projects? We have used "capitulation to self" and existing equity dilution through a "MIPA" (Membership Interest Purchase Agreement). This minimizes capital gains and keeps the property taxes from "uncapping" thus minimizing OpEx increases.

5. How do you assess the ROI potential of a conversion project versus ground-up development or traditional repositioning? Mostly, relative cost/SF of existing core and shell vs plus availability of incentives.

6. What role are ESG considerations (sustainability, energy efficiency, community impact) playing in your conversion strategy or investor decision-making? "The most green building is the one that's already built." While it is sometimes difficult to make an older building as efficient as a contemporary one, the recycling of older and historic assets is important—you cannot replace the quality of materials and details in many older historic buildings—and they become emblematic of community values.

7. Are you seeing increased demand for specific end uses—such as residential, life sciences, hospitality, or mixed-use—in converted properties? What's driving that demand? We are doing mixed use, hospitality and residential.

8. How do you evaluate market demand and tenant preferences when deciding whether to pursue a conversion? Are there data sources or tools you rely on? "Having your foot in the field" as my dad used to say. Know your market. We are fortunate that we have local non-profit partners that have done a great job assessing the demand for housing and in other cases, such as hospitality, we rely on the market studies of partners for that specific use.

9. What cities or regions are leading the way in CRE conversions, and what lessons can be learned from their approach? Hahaha. I think Grand Rapids Michigan is certainly leading here in Michigan!! 😊, and maybe Midwest! My company and I are working on three—with a fourth in planning.

10. Looking ahead to 2026, what trends or innovations do you think will shape the next wave of CRE conversions? Hopefully more of the same—we have seen reduced demand before in other asset classes—banks are freaking out and we can't just wait and hope for recovery—we believe that these type of projects are "1+1=4" as they not only are viable financially (even if we capitulate to ourselves) but they improve the demographics of the submarkets they are in and reduce the amount of office space which, hopefully will create scarcity in the future when demand returns. We like to use the analogy of Ramius turning into the path of the torpedo in The Hunt for Red October—"Combat tactics, Mr Ryan—by turning into the torpedo, the captain closed the distance before it could arm itself."

Brian Steinwurtzel, CO-Chief Executive Officer, GFP Real Estate, LLC

1. What types of commercial properties do you see as most viable for conversion in today’s market—and why? Large, low cost and as of right residentially zoned projects are the most likely to be converted.

2. What are the biggest technical or structural challenges you've encountered in conversion projects, and how have you addressed them?

Our project at 25 Water street required significant structural bracing in order to carve out two light wells and reallocate the floor area to build ten additional floors. Low cost basis is the primary mitigant.

3. How are zoning laws and permitting processes impacting the feasibility of CRE conversions in your region? Are there any recent policy changes that have helped or hindered progress?

We operate solely in the New York City area and almost exclusively pursue As of Right projects. The recent passage of City of Yes as well as the 467m program have increased the viability for Office to Residential conversions.

4. From a financial standpoint, what creative capital structures or financing strategies are proving most effective for conversion projects?

Longer closing periods to allow for the buyer to design and file the project along with seller financing are a few ways to improve the chance for a project to proceed.

5. How do you assess the ROI potential of a conversion project versus ground-up development or traditional repositioning?

As conversion projects are more risky, the returns (YOC, IRR, Multiple, etc) must be higher than ground up projects.

6. What role are ESG considerations (sustainability, energy efficiency, community impact) playing in your conversion strategy or investor decision-making?

In NYC, all projects must comply with energy code and typically will pass LL97 without penalty which basically mean they are extremely efficient. Furthermore, most new projects are entirely electric or almost entirely electric.

7. Are you seeing increased demand for specific end uses—such as residential, life sciences, hospitality, or mixed-use—in converted properties? What’s driving that demand?

The two largest demand groups are residential fair market housing and Class AA office.

8. How do you evaluate market demand and tenant preferences when deciding whether to pursue a conversion? Are there data sources or tools you rely on?

We have a significant internal database along with matrices that we utilize to determine which projects to pursue.

9. What cities or regions are leading the way in CRE conversions, and what lessons can be learned from their approach?

We only operate in the New York City region which seem to be leading with ~20-30,000 units in production to be converted.

10. Looking ahead to 2026, what trends or innovations do you think will shape the next wave of CRE conversions?

If I only knew the future…

Jeff Klotz, Principal, The Klotz Companies - Klotz Family Office (SFO)

1. What types of commercial properties do you see as most viable for conversion in today’s market—and why?

• Obsolete Class B/C office to residential: Highest viability where floor plates, glazing, column spacing, and egress can meet residential code. Policy tailwinds and pricing resets are finally making more deals pencil - office conversion/demolition is now expected to exceed new office construction in 2025, and the national conversion pipeline hit 81M sf across 44 markets by May 2025.
• Targeted downtowns with programs (NYC, DC, Calgary): Places actively de-risking with zoning and incentives are out in front. NYC’s “City of Yes for Housing Opportunity” broadened eligibility to convert a wider range of buildings; DC introduced powerful abatements; Calgary’s incentive fund catalyzed more than 2.6M sf of office conversions.
• Special cases: Older lab/light-industrial to creative office or residential; hospitality to multifamily or student; office to education or civic uses where floor plates are too deep for housing.

2. What are the biggest technical or structural challenges you've encountered in conversion projects, and how have you addressed them?

• Deep floor plates & daylighting (bedroom light/air): Often solved via “donut” cuts, light wells, or carving atria—but that’s costly, so we pre-screen for plate depth early. Tools like Gensler’s Conversions+ (or similar internal scorecards) let us triage candidates in minutes.
• Core/MEP reconfiguration & vertical stacks: We plan new wet stacks and risers early, assume major MEP upgrades (electrification/heat pumps for ESG), and capture 179D/IRA benefits where applicable.
• Egress, envelopes & facades: Early code consults + mock unit stacking studies; exterior upgrades to improve window ratios and thermal performance.
• Logistics & phasing: Where partial occupancy exists, swing floors + phased vertical progression keep safety and schedule intact.

3. How are zoning laws and permitting processes impacting the feasibility of CRE conversions in your region? Are there any recent policy changes that have helped or hindered progress?

• NYC: “City of Yes for Housing Opportunity” materially expanded which non-residential buildings (generally pre-1991) can convert, eased bulk/parking rules, and created more by-right paths—this has accelerated the pipeline of conversions citywide. (Litigation exists, but implementation is moving.)
• DC: Housing in Downtown (HID) program (20-year tax abatement) plus a 2024 assessment-freeze law for office repositionings—both directly improve feasibility.
• Calgary: Straightforward, well-funded grant per converted sf—clear, fast, and catalytic.

4. From a financial standpoint, what creative capital structures or financing strategies are proving most effective for conversion projects?

• Blended stacks: Senior + programmatic mezz or pref; construction lenders now underwrite to “value-on-stabilization” with lower leverage but faster approvals when public incentives are present.
• Public incentives: Local tax abatements (e.g., DC HID), TIF where available, brownfield where applicable, and Historic Tax Credits for pre-war buildings. Add PACE for envelope/HVAC upgrades. These tools often create 150–250 bps of effective savings on WACC versus a straight private stack.
• Bridge-to-conversion rescue capital**:** Filling basis gaps where asset pricing hasn’t fully reset.

5. How do you assess the ROI potential of a conversion project versus ground-up development or traditional repositioning?

• Speed to revenue & risk: If the building’s “conversion DNA” checks out (plate depth, window ratios, structure), conversions win on time-to-CO and entitlement risk vs ground-up, especially in constrained infill.
• All-in basis vs replacement cost: We underwrite to stabilized yield on cost vs market cap rates and replacement cost parity. In high-barrier CBDs, conversion can come in below replacement—huge edge.
• Sensitivity: We run multi-path scenarios (rent, incentive capture, capex creep) and require contingencies for unknowns (e.g., hidden conditions). Nationally, the rise in conversion/demolition vs. new office is itself an indicator that the return/risk profile is improving.

6. What role are ESG considerations (sustainability, energy efficiency, community impact) playing in your conversion strategy or investor decision-making?

Electrification & envelope: Heat pumps, ERVs, high-performance glazing, and LED + controls are now baseline; they de-risk compliance (e.g., LL97-style rules), reduce OpEx, and can unlock 179D/utility rebates.

• Embodied carbon: Reusing structure beats new concrete/steel—an inherent ESG win that investors now price in during IC.
• Community impact: Conversions refill CBDs with residents, supporting small business and transit ridership—key for approvals and for impact-minded LPs. (Calgary/NYC examples show policy support for this thesis.)

7. Are you seeing increased demand for specific end uses—such as residential, life sciences, hospitality, or mixed-use—in converted properties? What’s driving that demand?

• Residential (rental/mixed-use) is the clear leader in most U.S. CBDs—NYC’s office-to-housing surge is at the highest level since 2008, with millions of sf in motion.
• Selective hospitality/student where tourism or campus proximity supports ADR/lease-up.
• Life sciences: More selective post-2023 boom; only in true cluster markets (Cambridge, South SF, San Diego) with building parameters that fit lab MEP loads.

8. How do you evaluate market demand and tenant preferences when deciding whether to pursue a conversion? Are there data sources or tools you rely on?

• Data stack: CoStar/MSCI/Moody’s for supply/absorption & comps; mobile-device footfall (Placer/Replica-style tools) for 24/7 activity; USPS/residential permitting data; leasing broker roundtables.
• Micro-market tests: Unit-mix/rent shadow pricing, amenities A/B, and “day in the life” tenant journey mapping.
• Policy tailwinds: We overlay incentives/program maps to target submarkets where the math is materially better (NYC City of Yes, DC HID).

9. What cities or regions are leading the way in CRE conversions, and what lessons can be learned from their approach?

• NYC: Policy momentum + housing need; lesson—enable by-right paths and broaden eligible vintages; pipeline is growing meaningfully.
• Washington, DC: Make the math work with tax policy; lesson—predictable abatements attract capital.
• Calgary: Direct per-sf grants + clear playbook; lesson—simple, well-funded incentives drive outcomes fast (21 projects; ~2.6M sf).

10. Looking ahead to 2026, what trends or innovations do you think will shape the next wave of CRE conversions?

More policy alignment: Expect more cities to follow NYC/DC/Calgary with tax tools and zoning that default to allowing conversion.

• Faster feasibility triage: Widespread adoption of quick-screen tools (like Gensler’s Conversions+) to cut dead deals early and focus capital.
• Electrification retrofits at scale: Heat pumps, smart controls, and envelope upgrades move from “nice to have” to standard, aided by incentives (and local carbon laws).
• Mixed programming: Not just res—layering education, hospitality-lite, and health/wellness to keep CBDs active 24/7.
• Supply reset: With office vacancy peaking and conversions/demolitions outpacing new office in many markets, we’ll continue removing obsolete stock—stabilizing CBDs and supporting housing pipelines.

“NYC is now moving conversions at the fastest clip since the GFC - 4.1M sf this year alone—with Midtown leading. That’s policy + pricing + product finally aligning.”

Steve Plenge, Chief Executive Officer, Pacific Retail Capital Partners

1. What types of commercial properties do you see as most viable for conversion in today’s market—and why? We are very focused on evolving regional malls. This generally takes the shape of downsizing significant pieces of the mall. Department stores represent the easiest path for densification. However, we have also looked at simply scrapping the entire mall. Densification has principally focused on MF and townhome developments. Other uses are also possible, such as medical, hotel, etc.

2. What are the biggest technical or structural challenges you've encountered in conversion projects, and how have you addressed them? Although not converting malls, we do need to work through various restrictions and encumbrances on the site. We create a “minefield map”, that outlines the encumbrances that need to be removed to get to the “dirt” and create a developable site.

3. From a financial standpoint, what creative capital structures or financing strategies are proving most effective for conversion projects? Mall represent a unique covered land play. Existing CF can cover a significant amount of the entitlement costs as plans and entitlements are pursued. This helps considerably w returns.

4. Are you seeing increased demand for specific end uses—such as residential, life sciences, hospitality, or mixed-use—in converted properties? What’s driving that demand? Malls represent unique locations within a community. Some of the best land within a community w excellent traffic patterns and accessibility. MF and townhome developers are very keen on these sites but do not have the abilities to entitle and navigate the restrictions on a site. We do that and can create substantial value once entitled.

5. What cities or regions are leading the way in CRE conversions, and what lessons can be learned from their approach? All cities and communities we have pursued this effort have been very receptive to our work and visioning. Creating a true mixed use project is hugely beneficial to the community, adding a diversity of uses and creating viable live, work, play destinations.

6. Looking ahead to 2026, what trends or innovations do you think will shape the next wave of CRE conversions? Malls will be a much more popular investment thesis w investors. We have seen a large influx of capital into the space.

Remy Raisner, Founder & CEO, The Raisner Group

1. What types of commercial properties do you see as most viable for conversion in today’s market—and why? Office properties, primarily in Manhattan, fully vacant and with high vacancies, at low basis and with structures enabling legal light & air for residential units.

2. What are the biggest technical or structural challenges you've encountered in conversion projects, and how have you addressed them? We are primarily investing in North Central Brooklyn. We have looked into Manhattan projects, nevertheless, we have an edge in Brooklyn, but there are not many structures there to convert. The office market has very different dynamics than that of Manhattan, and there was never a large build out of offices. Thankfully, there are very deep residential properties opportunities in the Borough.

3. How are zoning laws and permitting processes impacting the feasibility of CRE conversions in your region? Are there any recent policy changes that have helped or hindered progress? NYC policies have certainly help, so did the fact that an accelerator was set up. It helps to have folks to talk to and expedite in this subsegment of the business.

4. How do you assess the ROI potential of a conversion project versus ground-up development or traditional repositioning? We don't build ground up. We do do numerous residential repositioning, along with mixed-use properties repositionings. We are basis investors so for us, price/ft is where things start. Upon that, real estate is to a degree an operations-oriented business, so all of the rest is about how to get from purchase to leasing and in how long.

5. What role are ESG considerations (sustainability, energy efficiency, community impact) playing in your conversion strategy or investor decision-making? We try to go with the rules if not the times: we go all electric, use energy-efficient appliances, use electric individual, high-end mini-split units instead of large and inefficient boilers.

6. How do you evaluate market demand and tenant preferences when deciding whether to pursue a conversion? Are there data sources or tools you rely on? It's no secret that generally, the City has trended downtown, and now towards Brooklyn, increasingly, and following transportation systems. So these are the fundamentals that we go by, and then generally periodically check them against data sources and statistics. But nothing is stronger than our own statistics: what we see in our portfolio, on the ground, and things we witness with our own eyes that can be hard to transcribe into numbers -for example, design features which would be very desirable but that you can't spot when looking at rental numbers or comps solely.

7. What cities or regions are leading the way in CRE conversions, and what lessons can be learned from their approach? New York, DC, Chicago from all I hear. It seems that you just need to have enough distress and a clearing price, as the first ingredient to the large-scale turnaround formula.

Anastasia Vladislavova, Director, Vanadium Group

1. What types of commercial properties do you see as most viable for conversion in today’s market—and why?

It's very tough to broadly characterize. Although class B/C office buildings should be the most viable because many legacy office buildings are functionally obsolete, the physical challenges coupled with the high cost of construction, make most of those opportunities economically unfeasible.

3. How are zoning laws and permitting processes impacting the feasibility of CRE conversions in your region? Are there any recent policy changes that have helped or hindered progress?

Recent zoning amendments have somewhat eased the path for residential conversions in select districts, however the current regulations on inclusionary housing, real estate taxes and lack of incentives make most of these projects extremely difficult to underwrite.

4. From a financial standpoint, what creative capital structures or financing strategies are proving most effective for conversion projects?

Layered capital stacks that include mezzanine, and tax incentives like energy credits, CPACE or affordable housing credits have helped bridge gaps in financing.

5. How do you assess the ROI potential of a conversion project versus ground-up development or traditional repositioning?

For a conversion project, our viewpoint is that both the going-in basis AND stabilized basis has to be considerably lower, than those for ground-up projects, for those projects to underwrite. Typically, with conversions, one may encounter unforeseen expenses that cannot be budgeted / planned for upfront, necessitating the need for lower upfront basis. In terms of stabilized basis, due to legacy conditions (ex. floor to floor heights) many conversions tend to have a lower maximum exit value as compared with new ground-up construction.

6. What role are ESG considerations (sustainability, energy efficiency, community impact) playing in your conversion strategy or investor decision-making?
LEED-certified developments, efficient systems, and various community benefits can unlock favorable financing options and potentially lowered operating costs.

8. How do you evaluate market demand and tenant preferences when deciding whether to pursue a conversion? Are there data sources or tools you rely on?

We perform our own feasibility analysis in-house to validate tenant demand and long-term market growth. Although we see the same information from third party data sources as the rest of the market participants, we tend to do our own building-by-building analysis and prefer to rely on firsthand data sources from individual property owners, listing brokers, etc. We greatly discount the value of data from third-party data aggregators.

10. Looking ahead to 2026, what trends or innovations do you think will shape the next wave of CRE conversions?

2026 will likely see some basis resets in underperforming properties, wheather through foreclosure, BK or otherwise. This reset, along with advances in modular construction, new flexible zoning overlays, and possibly even AI-assisted design tools may accelerate timelines, lowering cost and potentially broadening viable property types.

Register to join these industry leaders onsite at CRE Conversions, October 29 at the Union League CLUB, NYC!