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Home offices are in demand, but a conversion may not pay off

Renovations & maintenance

The working from home revolution that arrived with the pandemic appears to be here to stay  — just as the pandemic itself sometimes appears to be. 

About three quarters of the increase in remote work that has taken hold during the Covid-19 era is likely to stick, according to a study by researchers at Arizona State University, the Dallas Federal Reserve and Virginia Commonwealth University. 

The authors predict that twice as many workers will be fully remote as before the pandemic, and one in every five workdays will be from home.

A report on remote work from Ladders, a career site for jobs paying $100,000 and up, found that one in four professional jobs in North America will be remote by the end of 2022, and remote work will only increase in 2023. 

Based on data from North America’s 50,000 largest employers, the company reports that while remote opportunities represented less than 4 percent of all high-paying jobs before the pandemic hit, they represent more than 15 percent of such positions today. 

Where are all those folks going to find space in their homes to work?

The lure of the home office

Robin Titus-Schwadron, principal of Oak Park-based R Titus Designs, tells the Chicago Tribune that, before putting a house on the market, homeowners should be sure to have an office set up if they want their listing to be taken seriously. 

“We always make sure that there’s a room set up as an office,” she says, “even if it’s a sun porch.”

As a result, every conceivable space in the homes of the workforce has been converted into offices, including basements, attics, garages, sheds, and even closets (giving rise to the term “cloffices”).

This raises questions for owners of rental properties: do they need to convert space in the home into offices? If so, how much should they budget for the job? And can they expect the investment to pay off?

Research shows that home offices may not do much to boost a sales price, but these days many people looking to rent will ignore listings that do not mention home offices.

Think garages, basements and ADUs 

In the last half century, the size of the median American home has shot up by about 1,000 square feet from its rather modest 1,500 or so square feet in the 1970s, according to the Census Bureau.

Since the pandemic hit, most folks are feeling squeezed. In many households, the open concept floor plan that has dominated American home design for the last several decades was suddenly being reconsidered.

Some homes have garages that can be converted into roomy offices, and some owners have the budget to add an accessory dwelling unit in the backyard, while others will need to settle for a compact “statement” desk inserted into a windowless room, also known as a closet. 

April Hines, director of resident services at Mynd, said many of the company's residents are looking for ways to adapt their homes for remote work. Converted spaces, including garages and basements, are an effective way of attracting tenants.

Investors who are looking to buy rental properties remotely are well-advised to look closely at homes that allow for flexibility for those "wfh" (working from home). 

Garages are for more than cars

Even though Steve Wozniak says it’s “a bit of a myth” that he and Steve Jobs created the Apple computer in a Los Altos garage in the 1970s (they actually just hung out and talked about ideas there), two other titans of the 20th century were actually created in garages.

Larry Page and Sergey Brin created Google in a Menlo Park garage in 1998, and Bill Hewlett and David Packard founded HP in Packard’s Palo Alto garage in 1939. 

And who knows what capitalist behemoth of the 21st century will arise from such a humble space?

But before a property owner starts buying office furniture, much less running plumbing lines for a new bathroom, zoning regulations need to be consulted to see what is allowed. 

If local laws permit an adaptation, a homeowner should assess the bones of the structure, perhaps with an exploratory demolition phase, in which structural systems, mechanical, electrical, plumbing systems, and architectural elements are exposed and assessed. 

If the family’s automobiles are moved out, the former car park offers a fair amount of space (the average garage is about 400 square feet). Since it is separate from the home, unlike that corner office in the living room, it affords the stressed zoomer more isolation from the distractions of the family, and the ever-present stocked refrigerator.

And a garage allows for more leeway to decorate, without disrupting the existing aesthetic in the home (break out the lava lamps, velvet posters and bean bag chairs). 

Another plus is that, unlike makeovers that turn part of the living room or a bedroom into an office, no living space is sacrificed. 

But garages frequently don’t have much natural light. Those with a capacious budget can correct for that by replacing the door with one that is partly made of translucent glass, allowing in light without sacrificing privacy. 

If the garage has a plain concrete floor, the owner may have to cover it with tiles, carpet tiles, or some other inviting flooring surface.

Garages also are not usually well insulated, so homeowners may need to install drywall and insulation, as well as an insulated door, to make them habitable in all seasons, pushing up the price tag. 

HomeAdvisor estimates that a garage conversion can cost upward of $5,000.

Basements burst into glory

The humble basement is having its moment in the sun in the pandemic age, with one contractor in Cambridge, Massachusetts winning design awards for a $1 million renovation that included lowering the floor to allow for higher ceilings. 

Michael Sorrentino, aka “The Situation” from the hit MTV show “Jersey Shore,” and his wife, Lauren Pesce, have a YouTube show, “The Situations Under Construction,” devoted to the remodeling of their basement. 

The renovations include a spa and a “glam room” where Pesce can get dolled up before facing the cameras. 

“The projects just keep getting crazier,” says Pat Gagliano, of Finished Basements New Jersey, who is remodeling the Situations’ basement. 

More humble jobs cost an average of $15 per square foot, meaning a 200-square-foot project will cost an average of $3,000

But these spaces offer the privacy many need when conducting remote meetings, and playing solitaire instead of working on spreadsheets or marketing decks. Below ground, the temperatures are more consistently cool (perfect for napping).

Since basements are often dark, low-ceilinged spaces, light colors and bright lights are recommended, and a dash of nature, even if it’s just a tall faux plant, can make work life in the cellar more inviting. 

Accessory dwelling units hit the big time

One of the biggest trends in home offices today, reports USA Today, is the accessory dwelling unit, or ADU. Like the garage, this freestanding structure affords separation from the rest of the residence, with its many distractions (couch, television, pets, kids), and it doesn’t sacrifice living space. 

“Today, everybody is talking about ADUs because if you have the space and your zoning codes allow, it’s a wonderful solution that allows you to be close to your family and home but still have a quiet place to work,” Palo Alto architect Mary Maydan told USA Today.

According to a paper from the University of California at Berkeley's Center for Community Innovation, the median construction cost of a 600-square-foot ADU in California is $150,000, or $250 per square foot.

The bottom line on office conversions

But before investors strap on their tool belt, they should consider what return they hope to get out of the project. 

Data from both Redfin and Zillow indicate that listings that mention offices do sell for nearly their full asking price, but, especially in an era of ballooning costs of materials and labor, sellers should not necessarily expect them to pay for themselves. 

An expert with Zillow told the Chicago Tribune that “home offices only correlate with 0.6 percent more than the asking price.”

That’s a number investors need to keep in mind before breaking out the checkbook, though the rise in demand for home office space puts a premium on houses that reflect the new era of work.

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