Speaker 1we might have $100 million in this project, but maybe it's a $2 billion deal, right? So maybe the return is there. But then we have all this invested in, there's suddenly a local moratorium passed, and now that land is literally worth the $2,000 or $3,000 or $4,000 an acre because it's in the middle of nowhere, and you're in deep trouble.
Speaker 2Hey, what's going on, everybody? Welcome back to the Land Development Podcast. I am your host, Ryan Glick. We have an industry news episode for you today, and joining me as always is Charles Covey. How's it going, Charles? It's going great. Well, as we're about to press record, I was telling you that we had, over this last week and a half or so, it's been pretty fun because we've had a little viral moment on our Instagram page with one of our, well, a couple of clips from Jay Knighton. And it's been pretty cool to see all of the conversation happening in the comments from a lot of developers and builders from around the country. And definitely his message resonated and everything, but it's just, it's really cool when that happens. I think the last time we had a viral clip, it was more on the negative side with something where we had somebody on the show who insulted all millennials and the millennials didn't like it very much. So it was a little different than this one, but no, it's been pretty cool to see. And yeah, but kind of back at it with our industry news this week, and we're going to mix it up and get into a few different topics that I think one of them we've touched on before, but the other two, I think are relatively new to something we haven't really touched on before. First one we're going to get into today is something that we have talked about a long time ago, and that is office to apartment conversions. And so what's happening in that space around the country today. Then from there, we're going to jump over to data centers that are getting blocked all around the country. And then we're going to finish up with a look at mass timber becoming more mainstream. So with that, let's go ahead and get into our first article here, which comes to us from Construct Connect. Headline reads, office to apartment conversions, quadruple 90,000 units in the pipeline. From this article, office to apartment conversions have hit 90,300 units in the pipeline, up 28% in a year, and about four times the total. 2022. New York leads with 16,358 units, followed by Washington, DC at 8,479, and Chicago at 4,360. Denver, Philadelphia, and St. Louis each more than doubled their conversion pipelines this year. Office vacancy is stuck near 20% nationally, and Los Angeles alone has over 50 million square feet sitting empty. About 1.9 billion square feet of office, roughly 24% of the national inventory is rated suitable for conversion. Cities are speeding the trend with tax breaks and looser zoning to turn empty offices into housing. So I, you know, when I look at this, Charles, I see the numbers and I see the percentages, you know, and things have increased, you know, four times and everything. It's still a really small number, but I wonder from your perspective, do you think this is something that will start to gain traction if some of these cities are offering some of these tax breaks and making it maybe more realistic for developers to come in?
Speaker 1I know the tax breaks are enormous. So for, we'll use New York, for example, because that's where the biggest volume of this is. And Mondami has made this a big part of his campaign is to get a lot of these in process. And this was already moving before, before he showed up, but that tax program that they have, uh, the research I did said extends up to 35 years of tax relief for projects that include a affordable housing component. And that's why a lot of these projects make sense. They probably wouldn't pencil otherwise. And so I think that's a big part of this. And I think that's a challenge with these conversions is that sometimes they just don't pencil, right? You got to buy the building, then you got to do the conversion from what it was meant to be to something else. And that can create this whole plethora, a Pandora's box, if you will, of things. And we've got some instances of that. There's one, I don't know if you saw it on the news, the 222 Broadway, they had, they had these cracked beams and they got a partial, some partial interior collapses going on. This is a project that's being, being redeveloped. I mean, it's, it's not gone well, right? You always have that risk. You don't really know exactly until you start peeling the layers back on the onion. You don't know what's in there. And that does occasionally happen. So there's been some challenges, but 19,000 units in New York is it's a lot, right? Even in a, even in a big city that has a lot of units, it's a lot part of what makes New York go. Of course they have all of these incentives, but you think about New York, everything is built on a postage stamp. So even their widest skyscrapers, are not that wide. The floor plates are not that big. So the key here, and the part of the reason why it doesn't work as well in Dallas or somewhere else, that's got larger floor plates. We've got more space is that you get a, you get a unit or a building width over a hundred feet. And now it starts to get challenging because 40 foot depth on a unit is about all you can do with windows, right? Because then think about residential, you know, you've got to have a window in pretty much every major room. You might could do a den or a study without a window, but that's about all you can do. And you can only have so many amenities on every single floor to use up this extra space. So you've got to have a floor plate that makes sense. New York, generally speaking, has smaller floor plates on everything. Whereas you go to another city, you might go to Dallas and you get a tower that's got a 150 foot or 200 foot wide floor plate. Now you got half the building you can't even use. Like you can put basketball courts and go-kart tracks and all this other stuff in there, but now you're pricing yourself out unless this is a super luxury product. So the affordable housing is the whole premise. Anyway, it's a whole long explanation to say there's a lot of factors that go into it. And that's why we're seeing certain markets have some effectiveness and other markets have almost none just because that floor plate element is big and it just doesn't make sense in some of these locales. Something else that I was thinking about too, just looking
Speaker 2at these numbers is, well, based on this, there's 76% of the national inventory is not rated suitable for conversion. So of all of that inventory that's out there, that is vacant and I'm not saying that's that all that is vacant, but of the stuff that's vacant, I kind of wonder what's going to happen to a lot of that, you know, that, that product that's out there is just sitting empty and can't be converted. So what's going to happen to it?
Speaker 1Look at the percentage that's rated. So 24% is rated suitable. Okay. So that would be a floor plate, a location, all the things necessary. It doesn't mean it's available, right? It doesn't mean it's for sale and it doesn't mean that it's for sale at a price that even makes sense. You see what I'm saying? There's a lot of factors and there's a lot of owners that they don't really want to sell it for what it's worth. They want to sell it for what they think it's worth or for what it's worth on their books, maybe, which could be a radically different thing. And so at some point, they might have to take a huge loss in order to sell the building for it to go convert to another use. And they don't necessarily want to do that. So there's all these many factors that, that go into it, but it is, it's cool to see, but to your point, the ones that don't work for, that don't work for residential use is what becomes of them. There's been thoughts of, and there's been some examples of putting indoor hydroponics and, you know, doing agriculture vertically, you know, converting these to data centers. Of course, power is the challenge, you know, go to turn it into schools, you know, why instead of building a new school, why don't we just convert to put four or five, six floors of this building into, into a school. So the all kinds of things that you could do. But I think that a lot of those are still, still developing. Yep. So it'll be interesting to
Speaker 2play out and what other projects come up and everything. So we'll, we'll continue to keep an eye on it, but let's go ahead and move on to the next segment, which is from the comments. And I pulled a couple from Instagram based on those posts that we had from Jay Knight's episode. First one comes to us from Shay Trask. We need a higher density zones and walkable areas. That's the only way to get affordable. Landowners want too much money for the land and then building costs are up. The only way to bring costs down organically is to up the density in certain zones and build more housing. I've got another one here. This one is from the Estrada Janky. This also from Instagram. It's the soft costs, stormwater overkill, NIMBY attitude, et cetera. There are massive opportunities for small development within current infrastructure initiatives to redevelop depressed areas close to economic hubs is paramount. Bottom line, the older generation needs to step way back from gating new housing. Side note, HOAs are not going to be the same as they used to be. So we're going to have to wait and see what happens. I saw that last line made me laugh because I mean, quite frankly, and I've never, I should probably talk about this on like an interview episode, but it does seem like every one of these master plan communities and these developments have HOAs and I've never really dug into the reason for it. I don't live in an HOA, so I don't, I don't deal with it, but it seems like everything I see, there's always complaints about HOAs and stuff. And so I wonder, I know maybe they're not all bad, but man, they show up. Maybe it's just my own opinion. I don't know. It's just my algorithm on social media that shows me, well, it works fine if you don't ever want to
Speaker 1do anything different from a governance standpoint, it now creates a scenario. It's a framework that this community can perpetually, generally speaking, can take care of itself. Once the developer is gone, there's a process that it won't just completely fall apart unless you get some people in there that can, can turn it upside down. You get the wrong people on it, but there's ways to do that and groups that can manage the HOA for you and such. But if you want to do something different or something they don't like, it's an uphill battle.
Speaker 2Well, let's go ahead and move on to. the second headline. This one comes to us from Data Center Watch. Headline reads, Communities are blocking data centers. $130 billion stalled in one quarter. From this article, opponents blocked or delayed about $130 billion in data center projects in just the first quarter of 2026, the most in any quarter on record. The number of active local opposition groups more than doubled to 833, spread across 49 states. Over 300 state-level data center bills were filed in the first six weeks of 2026. Statewide moratorium proposals landed in 14 states, and Maine passed the first outright ban on facilities over 20 megawatts. The fight comes down to four issues, electric grid strain, water use, higher utility bills for residents, and few permanent jobs for the subsidies handed out. Local boards are moving fastest, with towns like Brookhaven, New York imposing an 18-month moratorium. Make this less of an asset for land out there?
Speaker 1Well, this is a pretty significant shift in that the numbers that I saw in my research show that 30, 40, or even 50 percent of projects nationally that could be being built in the data center space are held up for some reason because of some opposition or a pending moratorium or something along those lines. As a developer, you think about how bad that would be. Just think, for example, let's say I put a project together, we put all the money together, maybe we got, we might have a hundred million dollars in this project, but maybe it's a two billion dollar deal, right? So maybe it's going to, the return is there. But then we have all this invested in, there's suddenly a local moratorium passed, and now that land is literally worth the two or three or four thousand dollars an acre, you know, because it's in the middle of nowhere, and you're in deep trouble. So that, as a developer, I just can imagine that would be an absolute freaking nightmare. And there are guys experiencing that right now. And that is a super, that's a super challenge. So you've got to be extremely cautious in that space for how much capital you're committing until you have some of these things locked in. And so the challenge now is finding, it was finding the last, call it, year, was finding the power. Where can we get the power? Okay, just because we want a data center there doesn't mean we can get the power. Even if we think we can get the power, we can't get the study done to tell us we can get the power. So then it's not real. So then you got to go places where you can get the power. And now you have additionally to go places where you have power and you don't have a bunch of people opposing you. So yes, we get all in West Texas, you got all these places where you can get the power, and you don't have a bunch of people opposing you. So places where they're putting data centers up, there's nobody around. Nobody cares, there's nobody around. Not to say that nobody cares, but not enough people care to create a roadblock. And that is the challenge now. So I think there was a data center project that we were looking at participating in. It was in the middle of nowhere, Alabama. It was a repurposing of a textile facility that had a bunch of allocated power and could be increased and would go up. This is an area where there wasn't a lot of opposition. The Alabama power, I forget the exact entity that was there, but they were definitely interested in increasing. So that was one where there was not a lot of barriers. But as you can see, a lot of barriers in a lot of places. The really sad part is that if you break it down and you look at the places that have that have kind of set the standard here. So we look at Loudoun County, Virginia. They've got more data centers per capita than anywhere on the planet by a long shot, right? It's the data center capital of the entire universe. And it's going very well. And all those dollars flowing back into those local economies and what they're able to do with their school districts and their local counties and their roads, those dollars are pouring back in and it is good for everybody. So I think there's definitely opposing opinions there that think that, oh, we're destroying everything and it's terrible for the environment and all of this. They found a way to make it work that seems to be working quite well. The dollars are tangible and the local residents are benefiting factually. So getting that story out and sharing that story is going to be the challenge. But again, the NIMBYs often don't care.
Speaker 2Well, in this case, it's a pretty, this is a very polarizing topic. I mean, even I feel like this is even more so than a subdivision or a community that's going up somewhere. This is like, I feel like takes things to a whole nother level of opposition as far as the people who are upset about this. And I mean, you're just seeing all the clips that show up of people going to their city meetings and speaking in opposition to the cities. And they're blaming the city officials for kickbacks. And that's why they want this Google data center coming up in their, in their city and everything. And so it's been, yeah, it's been pretty crazy to see everything going on. And I'm not, I mean, as far as like where my head's on some of this stuff, I'm not saying I'm, I'm for or against, but I, I pay attention to the water and the power and the things being here where I'm at, knowing we have them. Water is a big question mark. And, you know, we've had some, uh, some experts in the data center space who have spoke. I should have pulled a clip cause I just came across it, but there was a guy in Iowa who's going viral because he spoke in front of a local, um, board about, I think it was Google that was coming, looking to build a data center. And he was talking about how he's been involved in data centers for many years and the water usage that these new data centers are using, there's other approaches to it that wouldn't use as much water, but they're not willing to spend as much money. And so he's, he's basically pushing to say, you know, it will be more, it'll work better for us. I guess I should say, if you push back on them and say, Hey, you can build here, but you have to do it this way because we're not going to give you all this water. We need that water for our residents or to treat in Iowa. We have a big problem with nitrates and it from all the farming. And if you don't have enough water to treat the nitrates and get the nitrates out of the existing water, then we have problems where the water's not drinkable at that point. So yeah, anyway,
Speaker 1it's been, it's been interesting to see. I'm seeing stuff with closed loop systems. They're doing shallow wells, doing saltwater systems. There's all kinds of things, you can do to try to solve that water issue. It is real. It is overblown in the stuff that I've seen though, because, okay, this data center uses X million gallons of water and it sounds like a lot, right? Have you ever seen that many million gallons of water in a pond? It's nothing, right? A million gallons is just nothing. And you think about what I've seen is, is comparing, okay, this data center compared to the total sprinkler water usage of this small town. Well, this small data center is just like a hundred times more than this data center. We use a lot of water as Americans. We like our grass green. We like our parks beautiful. We like our flowers blooming. We use crazy amounts of water. That data center water in most cases is just a drop in the bucket, but they're even solving that with closed loop. So I probably sound like I'm definitely for all of this. And I think that it's a case by case basis. The biggest one for me though, is the power scenario and the cost to the regular person. So for a regular person, a person's power to go up in cost because a business wants to co-locate near them. I don't think that's correct. I think that's a problem that needs to be solved. It can be though. And they have solutions for that. So that's the big one. I think all of these other ones, I think have a good solution. They don't affect the individual very often, but that power costs going up, that's a real challenge that has to be solved. Yeah. And I guess I'll add one other thing to
Speaker 2this and then we can move on to the next topic. But I, the other thing too, that is kind of a projects as well. And I say that from the standpoint of these big corporation, not the developers, but the big corporations who are coming in and actually the ones who are going to be running these data centers, they're getting huge tax breaks. I mean, significant tax breaks in a lot of these communities. And so that's becoming a pretty big issue because again, I'll go back to just my, what I know here and locally and that local community did have an Apple data center go in and they promised a certain number of jobs. But a lot of those jobs are just temporary that are going to happen. And then once it's done, most everything inside those data centers is automated. And so you've got some facilities, people that are going around the grounds and swapping out equipment stuff, but it's not really creating as many jobs as they, as the hundreds of millions of dollars in tax breaks they get. And so I think that's another sticking point that kind of goes beyond the development and is more so just local municipalities having to figure out the right approach that the community is actually going to get on board with and not exactly sure how that's going to play out around the country. Well, I think there's enough money flowing
Speaker 1in that space that they don't need a lot of breaks. I think that they, they can probably make these deals work. So maybe it's a, a smaller break or forcing the company to reinvest in the community in a certain way that's meaningful. They're making plenty of money. They're going to be fine. And I'm a capitalist, right? I think that if you're working hard, you should be able to charge what the free market will support and no one should need to take that from you. But in this case, I think that that's one way that from a development standpoint, you could be more likely to get deals done. I'm supportive of the community to get some of that, get some of that buy-in.
Speaker 2All right, well, let's go ahead and move on to our last article here. Last one comes to us from Forbes. Headline reads, mass timber goes institutional, taller towers, lower carbon, faster builds. From this article, mass timber is engineered structural wood, big glued panels and beams that replace steel and concrete as buildings frame. The market is small, but growing fast from 390 million in 2025 to approximately projected $1.07 billion 2033. Code allows mass timber towers up to 18 stories on the standard path and higher with special approval. The tallest so far, the 25-story ascent in Milwaukee, is a timber frame on a concrete base, not pure wood. New projects are institutional, not niche, a 550-bed student housing building in Denver and a 1,000-home affordable senior community in Bellevue, Washington. It cuts embodied carbon by about 30% versus concrete and stores carbon in the wood for the life of the building. Panels are prefabbed, so buildings go up faster with smaller crews, which helps on both labor and schedule. So I don't know a whole lot about this topic. Interested to get your thoughts on this, Charles, because we've talked a lot about timber on this show. We've talked a lot about concrete, and so now we have mass timber
Speaker 1as an option. Yeah, I've been involved in commercial construction for most of my career, and just watching mass timber come on the last decade or so has been really cool. I think it's great. So I think it's very, it's renewable, of course. We can continue to make this. Once you go mine the elements for concrete and you put it in place, now you've got a giant hole where you took it out, and you've traded something. There's no renewable nature to it. It's natural, not renewable. Whereas that tree, you can plant a tree there and grow it, plant another tree there and grow it, plant another tree there and grow it, and continue to recycle. And we've talked about this before. We have lots of timber in the U.S., tons and tons and tons of it. So it's not all perfect for this type of project, but a lot of it is usable. And so if you think about it, the way that they've been able to engineer some of these woods, like we've got panels, we've got panels that are very complex, they've got foam in between them, or they've got different layers crossed up. They're very, very strong, very smart engineers behind this. They are fire retardant, fire resistant, so they're very safe. And watching them go up, I've seen some go up here in Dallas. It's so cool. Because they just fly together. So it's literally as fast as you can sling these panels in the frame up there. They're screwing this together, bolting this together, and the buildings do go up very quickly. So that part has been really cool to watch. I think there's going to be more of it. Initially, the cost was a little bit higher. I think that that's coming down. Or maybe it's perhaps that those other elements are going up, the competing steel and the competing concrete, and it's making it more practical. So I think we're going to continue to see more of it. I love it.
Speaker 2All right. Well, any final thoughts before we wrap up today? I love these topics. These are fun for me. All right, guys. Well, I don't always mention this on the show, but every article that we cover, you can always find on the show notes page. So if you look in the description of any of these episodes and click the link there to the show notes page, you'll see links to every single article that we discuss on the show. And with that said, if you're not already subscribed, please click that button. We'd love to have you back for the next one. Otherwise, we'll see you back here tomorrow for our next interview episode. Take care. © transcript Emily Beynon
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