Commercial real estate is facing challenging con- ditions. Between ongoing high office vacancy rates, ever- expanding e-commerce and volatile trade markets, owners of underperforming commercial properties, including office, retail and light industrial spaces, are considering whether commer- cial condominium conversions to divide their larger rental assets into smaller, saleable units may offer a solution.
While it might sound like a quick fix, depending on the local sub- division process, site conditions and other legal restrictions, com- mercial condominium conver- sions can face roadblocks. Here, we explore the benefits, process, pitfalls and some strategies to make commercial condominium conversions work for you.
Potential benefits of commercial condominium conversions
Converting an existing com- mercial property into condos can offer several potential benefits since it establishes units that can be separately conveyed and fi- nanced. By selling individual units, owners can access cap- ital, monetizing the larger asset to pay off debt or reinvest in the property or other invest- ments. Additionally, commercial condos can spur investment by new owners and offer ownership opportunities to buyers, includ- ing small businesses, profes- sional groups and entrepren- eurs who might not otherwise have the ability to purchase an entire commercial building.
Condominiums can also attract buyers in certain markets such as creative office suites, med- ical clinics or specialized retail that often make significant long- term investments in improve- ments and may prefer to own their space.
What is condominium mapping?
Given these potential benefits, owners looking to convert their properties to condominiums should familiarize themselves with the process of condomin- ium mapping. Legally, condomin- iums are a form of subdivision and are subject to requirements under state and local law. At a high level, this means that an application for a subdivision map is required and is subject to approval by the local land use authority (the city or county). One or more subdivision maps, which may include tentative and parcel or final maps, are required.
Depending on local requirements, approval of tentative or parcel maps may require discretionary approvals from the local plan- ning department, planning com- mission or city council, which may take several months or even years to complete. Discre- tionary approvals are also sub- ject to compliance with the California Environmental Quality Act (CEQA), which is a highly technical legal process often subject to challenge by devel- opment opponents. Tentative maps are often subject to con- ditions of approval that must be met prior to recording the final map approving the con- dominium units. These condi- tions may include on-or off-site improvements, right-of-way de- dications, or improvements and access improvements.
For the creation of condominiums, the final map typically approves the creation of con- dominiums, and one or more separate condominium plan(s) are thereafter recorded with the consent of the record owner and any lenders or other bene- ficiaries to establish the bound- aries of the units, common areas and any association property. State law also requires record- ation of a declaration of cove- nants, conditions and restric- tions (CC&Rs) and formation of an owners association to create the condominium regime. The CC&Rs and other governing doc- uments establish necessary ease- ments, cost-sharing between condominium owners, how the project as a whole will operate and be maintained, and often include use restrictions and architectural review require- ments, among other provisions. The condominium structure offers flexibility since the individual unit and common area bound- aries can comprise any three- dimensional portion of the pro- perty. This allows for the cre- ation of separate airspace units within a building, or units that include entire building structures, similar to fee title lot ownership. In addition, as long as compliant with the entitle- ments, the condo plan is in- itially recorded and can later be amended without any city consent or approvals.
Other pitfalls to watch for
In addition to the mapping it- self, local planning regulations such as the city or county's general plan, community or spe- cific plans and local zoning codes may also govern commercial condominium conversions. Reg- ulations may include outright restrictions or limits on condo- miniums, or development stan- dards such as lot dimensions and minimums that may be applicable in the case of a subdivision that proposes to create new lots. Permits relating to the existing development may include limits or conditions on conversion or intensification, and recorded public and private restrictions on title (such as existing CC&Rs and master association requirements if the site is part of a larger overall development) may also limit a site's potential for condominium conversion.
Additionally, properties that have certain physical conditions, such as sensitive biological resour- ces, including vegetation, steep slopes or floodplains may be subject to more stringent local or even state environmental permitting, which may be trig- gered even if physical devel- opment is minimal. It is impor- tant to have a full picture of site conditions, both legal and physical, impacting the ability to create commercial condo- miniums.
Strategies to help conversion proceed smoothly
Depending on the jurisdiction and limits imposed by any ex- isting private covenants, some conversions may be able to take advantage of streamlining under state and local laws that allow for ministerial approval of certain subdivisions in com- mercial and industrial zones. Subdivisions of less than five total units are also typically eligible for faster processing.
Because of the many factors that impact the ability and pro- cess of commercial condominium conversion, it is important to engage an experienced team from the start, including a civil engineer, surveyor, architect and real estate and land use coun- sel, to analyze physical and legal constraints on subdivision and strategize on an approach to obtaining all required appro- vals, both public and private, to effectuate the conversion to individual condo units.
Originally published by Daily Journal, 18 June 2025
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
