“For an office building, you can’t get a loan today…there’s no liquidity in the marketplace,” Gottlieb told Fortune. And with interest rates being higher, it’s eating away at a lot of the cash flow, Gottlieb said, calling it a “very trying time.”

In his view, the difference with this office real estate downturn as compared to previous downturns is that office owners are wondering if demand will ever return.

“This time, people are questioning whether they’re going to need that space at all,” Gottlieb said. “I believe they will be back. Things always evolve, things always change, but my experience has been that paradigm shifts move really quickly and then they come back closer to where it started.”

Gottlieb was the first to admit that what’s going on isn’t good for him or his industry, so it’s safe to say that he and his industry would benefit from people returning to the office. Either way, given where we’re at, if companies have the opportunity to save money by cutting back on office space, they’ll take it. It’s all triggering a “reset in value,” as Gottlieb put it. But Gottlieb said that property values, vacancy rates, and transactions are “all over the board,” with the so-called better buildings with better amenities mostly coming out on top. And for the most part, he said, companies do want office space, it just depends on how much space they want.

“We have challenges, like everybody else,” Gottlieb responded, after being asked if the firm has had to sell any of its buildings, or even turn in the keys, without giving a yes or no answer. But he did say that at the end of the day, the firm is one that lenders want to work with. 

“The world changed on all of us,” he said. “If [the lenders] want to take the keys back, they take it from me—what are they getting by giving it to the next guy?” he asked, adding, “Once they foreclose, it’s worth even less. They don’t really have the capabilities typically to operate. And there’s no liquidity in the market to sell, unless it’s rock, rock, rock bottom. So we’re finding that lenders are working with us and we’re working with them.”

Even so, Gottlieb said, Keystone was ahead of the game in refinancing. Still, in reevaluating its portfolio, the firm has entered into the world of office-to-multifamily conversions. Gottlieb said it plays to their “core competency” over the years, considering that the company used to buy older, suburban offices and put a lot of money into them, not just a Band-Aid or some makeup, as he put it, to reposition them. Those older office buildings were typically in the best locations, but they needed capital, he said. Sometimes that meant putting new air conditioning systems in, or completely removing the facade and replacing that exterior with glass for natural light.

“That’s where we started, and we morphed into this mixed use,” Gottlieb said. “We were never afraid to work within an existing building. And, you know, we’ve made plenty of mistakes along the way, but I chalked it up to experience. So converting a building from office to residential sounds more like a challenge than something to be scared of to us.” 

Instead of a complete conversion, Gottlieb said, Keystone has made office buildings into mixed-used spaces. He gave the example of the Curtis building in downtown Philadelphia, which was just under a million square feet and has become a sort of landmark in the city as a former publishing house. Gottlieb said part of the office had unusual sizing, but it was the perfect depth for apartments. So the company created a separate area and built apartments—which are now some of the highest-priced in Philadelphia, he said. That creates more supply, which is needed because the nation’s housing market is underbuilt, but it’s not affordable housing. 

“​​It’s hard to do affordable housing anywhere, anytime right now,” Gottlieb said, adding later that “every lever is kind of working against you.” 

The price of construction is up, the cost of borrowing is up, and the amount of money lenders are willing to lend is down, he said. And at the end of the day, in his view, investors want a return. That’s all to say that affordable housing doesn’t seem to be the number one thing on investors’ minds. 

In Keystone’s own office-to-multifamily conversion process, Gottlieb said they start by looking at location, then they look at floor plates, which just refers to the leasable space on an entire floor of a building. “So if I have a building that I can design, and I’m only losing 10% or 20% of the space, that’s way better than a building that I’m losing 40% of the office rentable area,” he explained. 

But what seems to be Keystone’s secret weapon, if you will, is mixed-use zoning. Downtown Philadelphia’s zoning code works for apartments, Gottlieb said, but the suburbs are sort of separated by uses—although there has been a push over the last several years to accept a mixed-use environment. Zoning can sometimes be a deal breaker, taking into account how much it can slow down the building process. Gottlieb said it can take one to two years sometimes just to get zoning approval before you even start development. 

“It’s not the slam dunk that everybody thinks it is,” he said. “It’s not that easy. Most buildings don’t work.” 

Still, seeing that there’s hardly any liquidity in the market, you’d think that even securing a loan for these conversions would be difficult. “Everything’s a struggle today,” Gottlieb said. “And I think if we were just starting out, the answer would be we couldn’t get a loan for it.”