Converting an Office Building into PBSA — Costs, Risks, Examples (SHED Sky Living)
SHED Sky Living Warsaw (Lipowy Office Park) — 733 beds from an office building. Conversion models, average costs, and how to assess a project as an investor.
The Polish office market in 2023-2025 has record vacancies — especially in older class B and C buildings. This created an opportunity for PBSA operators: converting an office building into a dormitory. Lower cost than a new build, with a location that is usually good (office buildings sit in the centre / good districts).
In this article — models, costs, examples and risks.
The scale of the phenomenon in Poland
According to industry reports (Knight Frank, Savills), in Poland in 2023-2025:
- Vacancies in class B/C offices: 15-20% in Warsaw, 10-15% in other cities
- Active PBSA conversions: approx. 5-10 projects in the 2024-2028 pipeline
- The best-known conversion: SHED Sky Living Warsaw (733 beds, formerly Lipowy Office Park)
This is a global trend — in the US, "office-to-resi" conversions have become the main way to revitalize city centres (after the pandemic, hybrid working reduced office occupancy).
Example — SHED Sky Living Warsaw
Project data:
- Location: Żwirki i Wigury 31, Ochota (Lipowy Office Park, class B)
- Original building: an office building (floor area approx. 18,000 m²)
- After conversion: 733 PBSA beds (single + twin studios, common areas)
- Operator: SHED Living (1 Asset Management)
- Opening: 2024 (parts), 2025 (full)
What was rebuilt:
- Open-plan offices → individual rooms with a private bathroom
- Conference rooms → coworking zones, a cinema room, a games room
- Reception → reception + lounge
- The office canteen → a shared kitchen
- The underground car park → partly retained + a bicycle zone
- The roof → a recreation area (a terrace)
Average conversion costs
Cost of acquiring an existing class B/C office building: PLN 2,500-4,500/m² (vs a new class A office building: PLN 8,000-12,000/m²).
Conversion costs:
- Architecture and design: PLN 200-400/m²
- Demolition and internal reconstruction: PLN 1,500-2,500/m²
- Bathrooms (a new installation in each room): PLN 8-15 thousand/bathroom × number of rooms
- Shared kitchens / kitchenettes in studios: PLN 200-500/m²
- Installations (electrical, plumbing, ventilation): PLN 800-1,500/m²
- Premium fit-out (PBSA standard): PLN 1,000-1,800/m²
- Furnishing (furniture, appliances): PLN 5-10 thousand/room
Total conversion CapEx: PLN 4,500-7,000/m² (vs a new PBSA asset: PLN 8,000-12,000/m²).
In total, acquisition + conversion = PLN 7,000-11,500/m² — 20-40% cheaper than a new build.
Delivery timeline
A conversion typically takes 12-24 months:
- Architecture, permits: 4-6 months
- Demolition and reconstruction: 8-12 months
- Fit-out and furnishing: 2-4 months
Vs a new PBSA asset: 30-48 months (land acquisition, design, permits, construction).
A conversion = 2x faster delivery.
Upsides of conversion for the investor
1. Lower CapEx vs a new project. 20-40% cheaper per metre.
2. The location is usually good. Office buildings sit in the centre or in good districts (high PBSA demand).
3. Faster delivery. Cash flow starts 2x faster.
4. Lower regulatory risk. The existing building already has permits — only a change of use is required.
5. A "value add" premium. The investor adds value through the rebuild — they can sell at a premium vs the acquisition.
Downsides of conversion
1. Structural constraints. An office building is open-plan — rebuilding into rooms requires new walls. Some buildings have layouts that are suboptimal for residential use.
2. Plumbing and electrics. Every room requires its own bathroom + kitchen (in studios). That is a substantial rebuild of the systems.
3. Ventilation. Office ventilation differs from residential. A system replacement is often required.
4. Permits. A change of use requires a change to the MPZP (the Local Spatial Development Plan). This can sometimes take 6-12 months.
5. Energy (EU Green Deal). Old class B/C office buildings are usually energy class E-F. Modernizing to A requires significant CapEx.
Conversion models
Model 1 — full ownership. The investor buys the office building, rebuilds it, and runs the asset as PBSA. Maximum control, but the highest CapEx.
Model 2 — joint venture with a PBSA operator. The investor provides capital + the property, the operator manages the conversion and operation. Profit split typically 70/30 (investor/operator).
Model 3 — selling the finished asset. The investor / developer buys the office building, converts it, and sells the finished asset to an operator (Xior, Kajima) at a premium. The "develop and sell" model.
Model 4 — operator-led. The operator (SHED, Basecamp) buys the office building and carries out the conversion self-funded. The most capital, but full control.
What to verify before investing in a conversion
1. Location. Is the office building in an area with PBSA demand? Check the students of universities within a 15-min commute.
2. Building structure. Does the room layout allow an economical rebuild? Open-plan is easier; rigid partitions are harder.
3. Technical condition. Age, the quality of the systems (ventilation, plumbing, electrics).
4. Energy class. Class E-G = significant CapEx to modernize to A (EPBD compliance).
5. Permits. Does the MPZP allow a residential/PBSA function? The time needed for a change.
6. Operator partner. Is an experienced PBSA operator willing to cooperate? Without an operator, a conversion has a low exit value.
A real example — calculation
A class B office building in Warsaw, 10,000 m², 100 rooms after conversion:
| Item | Amount |
|---|---|
| Purchase of the office building (PLN 3,500/m²) | PLN 35 million |
| Architecture, permits | PLN 4 million |
| Demolition + reconstruction | PLN 22 million |
| Bathrooms (100 × PLN 12 thousand) | PLN 1.2 million |
| Installations | PLN 10 million |
| Fit-out | PLN 13 million |
| Furnishing (100 × PLN 7 thousand) | PLN 0.7 million |
| Total CapEx | PLN 86 million |
After conversion — 100 rooms:
- Average rent PLN 2,500/month × 100 × 12 = PLN 3 million/year
- At 95% occupancy: PLN 2.85 million/year
- NOI (after 25% operating costs): PLN 2.14 million/year
- Yield: 2.14 / 86 = 2.49%
Too low? Yes, if we calculate yield from day 1. But:
- The asset's value rises after conversion (PBSA cap rates 5.5-6.5%)
- Exit valuation: 2.14 / 0.06 = PLN 35.7 million for the asset (a mere 40% of CapEx) — this does NOT apply to a single asset. A whole 100-room portfolio may carry a different valuation.
Correction: PBSA valuations per room are PLN 200-400 thousand in premium locations. 100 rooms × PLN 350 thousand = PLN 35 million nominally. But the real exit after 5-7 years could be higher, owing to rent inflation + capital growth.
A full IRR calculation over a 10-year horizon: 8-12%, depending on the location and the operator's pricing power.
Conclusion
Converting an office building into PBSA is an attractive 2024-2028 strategy in Poland. Office vacancies + a PBSA shortage = a match.
The sweet spot:
- A class B/C office building in a good location
- 6,000-15,000 m² of floor area
- A purchase price below PLN 4,500/m²
- The option of a PBSA operator partner (Xior, Kajima, SHED)
It requires real-estate development experience — this is not an investment for a passive buyer. The most common model: family office / acquisition fund + a managing operator.
Sources
- Knight Frank — Polish Office Market Reports 2024-2025
- Savills Polska — Rynek PBSA w Polsce 2025 (The PBSA Market in Poland 2025)
- SHED Living — information on the Sky Living Warsaw project
- Cushman & Wakefield — Polish PBSA Investment Insights
