Michael Thom discusses the office-to-residential conversion trend in suburban Philadelphia
Obermayer business and finance attorney Michael Thom was interviewed by Benzinga in connection with Philadelphia’s abundant regulatory restrictions causing office-to-residential conversion investors to go to the city’s suburbs. In the article, titled “Philadelphia Suffering From Vacant Office Space, But Developers Head To The Less Regulatory Suburbs For Apartment Conversions,” published on May 12, 2023, Mike shared that suburban municipalities are more open to making changes to encourage apartment conversions in their communities.
“Local suburban municipalities are more open to losing some of their building restrictions. They’re willing to work with developers more because they’re taking that abandoned office space and using it,” he said. “One of the reasons they’re more open to abandoning zoning and other restrictive regulations is that the suburban Philly vacancy rate is worse than in the city.”
But despite local suburban municipalities showing a willingness to work with developers transitioning office space, money is still hard to find.
“Financing is definitely tougher. Banks are limiting the money they put on the street and then you have some that are moving forward, but the project might now work at a 7.5% interest rate,” Mike said. “It’s the mom-and-pop developers who are having the tougher time and sometimes get loans that have a floating rate. They’re the ones getting hurt. The seasoned developers have seen this scenario a hundred times and know how to manage the financing part of it.”
Read the full article here.