Connecticut launches grants for office-to-apartment conversions

With a Greenwich office conversion highlighting the appeal for developers in building Connecticut apartments where they can shoehorn them in, the cost of renovations remains a major hurdle — but the state has a new grant program to help out on that front.

Entering July, the Norwalk-based commercial tenant advisory firm Choyce Peterson listed eight office buildings in lower Fairfield County alone that are slated for residential conversions, ranging from a pair of Merritt 7 Corporate Park buildings in Norwalk to the onetime headquarters of Xerox and Gen Re in north Stamford.

Combined, those eight buildings total 1.8 million square feet of space, according to Choyce Peterson — sufficient for anywhere from 7,000 to 12,000 workers in the days before the hybrid work era that mushroomed during the COVID-19 pandemic. And there are more in Connecticut, including this year’s proposal to create a hybrid office-residential campus, but with Simsbury officials scotching plans for another big project there.

In Greenwich, Fareri Associates plans to build 44 apartments in its proposed J Lofts on East Weaver, in the former headquarters of Icon International at 1 E. Weaver St. fronting West Putnam Avenue. Icon International is now based in Stamford providing ad placement and other business services. Prior occupants of 1 E. Weaver included Blyth, which through PartyLite and other brands sold household products through home-based salespeople.

As the case with Westport, office availability in Greenwich’s central business district has been “super-tight” since the pandemic, in the words of John Hannigan, principal of Choyce Peterson.

“The … interesting thing we’ve observed — and this is only in the last year and a half or so, two years maybe — these companies that moved and shrunk are asking the landlords for more space, because they downsized too much,”  Hannigan said. “They didn’t fit out their space appropriately for the people coming back to work, if they’re mandating everyone is back at work on the same days — typically Tuesday, Wednesday and Thursday — and they need a seat for everybody. They’re still fleshing that out.”

But there is plenty of elbow room in a number of buildings Stamford, Norwalk and other parts of Fairfield County and Connecticut. In downtown Stamford, Indeed’s former office at 177 Broad St. is slated for conversion to apartments by developer RMS Cos., with RFR Realty converting its nearby Canterbury Green office fully to residential after long operating it as a hybrid building with both offices and apartments.

In Norwalk, another former Xerox headquarters building at 201 Merritt 7 is being readied for conversion, as well as the former Datto headquarters next door at 101 Merritt 7 with both companies relocating to nearby buildings.

Also in the works is 535 Connecticut Ave., on a major Norwalk retail corridor, along with multiple floors of another office building at 200 Connecticut Ave.

Last month, Connecticut officials shared details on the state’s new Greyfield Revitalization Program that will provide a financial boost for the residential conversion of offices, retail boxes, historic school buildings and others that have vacancies exceeding 25% of their leasable space. Eligibility extends to buildings as small as 7,500 square feet.

The program launches with $4 million in funding and a cap of $250,000 in support for any one project. The Connecticut Department of Economic and Community Development has set an Aug. 5 deadline for application and is eyeing September to announce the first set of grants, with developers required to partner with municipalities or entities focused on economic development in their applications.

The focus of the initial round of funding will be on helping cover the cost of planning for office conversions, according to Matt Pugliese, DECD deputy commission, but with the intent to expand to helping cover capital costs of those projects in later funding rounds.

“The goal here is really to … mirror the great program that we have in our Brownfields Redevelopment and Revitalization Program,” Pugliese said, speaking in a mid-June webinar on the new program. “We really want this initial planning and assessment grant opportunity to be a catalyst for communities — to start conversations between the municipality and the private property owner.”

While the cost to convert commercial buildings to residential is significant given differing structural elements and occupant use of water and other needs, Hannigan said building owners face a squeeze in accommodating new office tenants as well who want spaces tailored to their specifications.

“One of the difficult components of this market for landlords is that the rents generally have not increased year over year – however, the cost of construction for tenant improvements, … materials and labor, has escalated,” Hannigan said. “We have a lot of buildings that  have large floor plates, and it would make sense from a market point of view to subdivide those floors and get four or five tenants on a floor. But again, the landlords are looking at the cost, … and it’s cost prohibitive.”

Includes prior reporting by staff writers Sandra Diamond Fox, Robert Marchant, Joseph Villanova and Mark Zaretsky.