Communities nationwide are grappling with the scarcity of affordable housing, compounded by the steep costs associated with developing new multi-family units.

This shortage of "Class C housing stock," is reaching critical levels, with occupancy rates as high as 96% nationally and 99% in the Midwest.

At the same time, spurred on by the after-effects of the pandemic, more office space is sitting empty in the United States than at any point in the past 50 years.

The lockdowns that began in 2020 sparked a rising trend toward remote work, and more and more commercial real estate sites are struggling to find occupants.

Could this be the solution housing advocates are looking for? Adaptive re-use is a general real estate term usually applied to urban areas. It is defined as preservation and enhancement of existing structures - often historic assets - by adapting their use.

Re-purposing buildings is nothing new for the commercial real estate industry. Cities have transformed everything from warehouses, factories, and schools into useable space for retail, restaurants, museums and more as part of downtown renewal projects.

Today, many cities, including New York, Boston, and Cleveland, are embracing the idea of residential retrofitting. Planners believe it could spread beyond city borders: The post-coronavirus economy left hundreds of already declining suburban malls and big box retail stores sitting at the doorstep of extinction.

But the conversion of empty office and retail buildings into livable residential units poses significant challenges. Office and retail buildings have inherent structural limitations and design challenges, such as inadequate natural light and ventilation. In addition, housing multiple families requires multiple amenities, such as separate utility access and control, separate bathrooms, and additional kitchens.

Costs to retrofit commercial buildings for anything other than dormitory-style residences are prohibitive, ranging from $100 to over $500 per square foot. Furthermore, many office buildings are occupied by tenants with long-term leases, delaying availability.

But long before Covid-19, U.S. cities had an affordable housing crisis, with a shortage of as many as 7 million units. The post-pandemic housing environment underscores the need for reimagining development concepts.

While office and retail conversion may not be a panacea, it is a possible step towards revitalizing communities and repurposing underutilized spaces for the benefit of the overall housing industry.