Adelaide has a property problem on two fronts — offices in the CBD are sitting empty while the city has the tightest rental market in the country.

PropTrack data shows just 0.83 per cent of Adelaide’s rental properties were vacant in March, compared to 1.08 per cent across the nation.

In contrast, nearly one in five commercial office spaces in the CBD were empty, according to Property Council of Australia data from February.

Adelaide’s lord mayor has suggested converting aging, empty office spaces into residential apartments in a process called adaptive reuse.

But experts and South Australia’s peak property group say it is not always simple and can at times be more costly than constructing a new building.

What’s going on with Adelaide’s property market?

Prospective renters are struggling to secure a roof over their heads as they contend with the tightest rental market in Australia. 

Private analytics company PropTrack said Adelaide’s rental vacancy rate has remained below 1 per cent since September 2021, longer than any other capital. 

But Adelaide’s CBD is facing a problem of a different kind.

Adelaide’s CBD has a commercial vacancy rate of nearly 20 per cent.(ABC News: Lincoln Rothall)

The city had a commercial property vacancy rate of 19.3 per cent in February, according to Property Council of Australia data — the highest in the country.

On Tuesday, the state government announced the Walker Corporation would build a 38-storey skyscraper at Festival Plaza next to parliament.

Adelaide’s Lord Mayor Jane Lomax-Smith told the ABC she was “disappointed” money was not directed to the adaptive reuse of the city’s older, vacant buildings.

“We would want some of the old office blocks to be refurbished and be given a new lease on life because the most sustainable building you can ever have is the one you don’t demolish,” Ms Lomax-Smith said. 

What is adaptive reuse?

SA’s Department for Environment and Water defines adaptive reuse as the re-purposing of a building for a new use while preserving its heritage. 

High-profile examples of adaptive reuse in Adelaide include the Lot 14 buildings on North Terrace, the Sir Samuel Way Building in Victoria Square and the Colonial Mutual Life building on King William Street, according to the Adelaide City Council. 

Ms Lomax-Smith said about 30 dwellings were ready for adaptive reuse in the city.

Jane Lomax-Smith says she is “disappointed” money was not directed to adaptive reuse of exisiting buildings.(ABC News: Che Chorley)

She said while converting more office spaces into homes would not solve the housing crisis, it could open up more options.

“I do agree that if you have a very large footprint of a very tall office block, it’s very difficult to convert because you can’t give windows to everyone,” she said.

“But if you’ve got a two or three-storey development that’s vacant, then the issues to deal with are sometimes heritage conservation, sometimes sustainability, sometimes noise protection.”

Greens MLC Robert Simms has also backed the idea and said the city’s vacant offices should be converted into short-term accommodation. 

“Rather than having people on the street, we should be looking at what we can do to make better use of those buildings,” he said.

Planning Minister Nick Champion told the ABC there were few state government barriers preventing the re-purposing of office spaces and that it was up to businesses to invest in adaptive reuse.

“We feel we’ve largely got the balance right and it’s really for the marketplace, the building owners and others to begin those conversions if they make economic sense for the building owner,” he said.

How achievable is it?

Mr Champion said some buildings could not be modified to meet safety requirements or be upgraded to include the infrastructure necessary for residential living.

“There are obviously important rules around earthquake and disability but we think they’re prudent to keep in place,” Mr Champion said.

University of New South Wales built environment professor Phillip Oldfield said converting commercial spaces into homes was an excellent idea but only in some circumstances.

Nick Champion says it is up to businesses to invest in adaptive reuse.(ABC News: Carl Saville)

“This is not an easy thing to do. There’s fundamental challenges, particularly because there’s a design mismatch between offices and apartments,” Professor Oldfield said.

“Offices tend to be quite big and open, apartments tend to be much slimmer, so it only really works with slimmer office buildings.”

Professor Oldfield said the reason conversions mostly work best with slimmer office buildings was due to ventilation and access to light.

“We’ve seen in some cases around the world, deep office floor spaces converted to residential and you sometimes get bedrooms inside the building without access to a window,” he said.

“I’d be really concerned in situations such as heatwaves, or where people don’t have access to air conditioning.”

He said converted office spaces were unlikely to become affordable housing options because they have historically been converted into luxury or high-end apartments. 

“We know that many of these office locations tend to be CBD locations and that means the land cost is quite high and it means it’s very difficult to convert offices to affordable housing,” he said.

What does business think?

Bruce Djite from the Property Council of Australia said developers had to jump over more regulatory hurdles to convert an office space into a residential building.

He said re-purposing office spaces into homes often cost more than constructing a new building.

“The reality is there is a lot of hurdles to do the adaptive reuse, which to make that idea a reality, is very difficult, at times impossible,” Mr Djite said. 

Bruce Djite says adaptive reuse is sometimes “impossible”.(ABC News)

“Whether it’s improving office stock as is or embarking on what is a huge challenge in adaptive reuse — office to residential — the environment currently in the city isn’t one that’s conducive to taking on more risk.”

Mr Djite said re-purposing buildings alone would not be enough to improve the housing crisis. 

“It’s not a silver bullet, so even if you could do one or two or a handful of projects, if developers were capable of doing that … it’s a drop in the ocean when we talk about the housing crisis,” he said.

But Ms Lomax-Smith said the council’s information suggested it was worth the investment.

“We’ve got some financial markers that say that it is stacking up and obviously not for every building … but if you’re looking at a two or three-storey building … it’s crazy not to look at a way that you can convert it,” she said.