University Towers, Ann Arbor’s oldest student high-rise, could have 30 bedrooms added to its residential mix, based on an application coming before the city’s Zoning Board of Appeals tonight.

The building owners seek permission to convert all of the second-floor office space to additional residential rentals.

The 18-story building - located at 536 S. Forest at the corner of South University on the edge of the University of Michigan - was built in 1965.

Occupancy is now 480 residents in 240 apartments.

If the proposed changes are approved, owner University Towers LLC will be able to add 12 apartments: 8 3-bedrooms, 3 2-bedrooms and a single 1-bedroom.

The request coincides with the early 2011 expiration of the lease for the 13,000 square-foot second-floor office, now occupied by the University of Michigan.

“They haven’t had a lot of interest from other office clients,” Matt Kowalski, city planner, said he was told during the review of the application.

The space is listed with Colliers International for $21 per square foot per year. Listing agent Michael Giraud said inquiries have come so far from prospective tenants who’d use part of the space but not the full floor.

The request to the ZBA expands the options for the buildings ownership, including managing partner James Baldini of Suburban Campus Properties Inc., based in Wakefield, Mass.

Neither Baldini nor building manager Dena Isley have returned calls seeking comment for this story.

Architect Richard Henes of Ann Arbor’s Cornerstone Design presented the application to the ZBA.

“The economics that the owner explained to me is that they thought it would be much more stable as apartment than office, since there’s a glut of office space,” Henes said.

The proposal comes as several new campus housing options are in various stages of development or recently opened. They include Zaragon Place on East University; Zaragon Place 2 on East William; and 601 Forest, which is awaiting final demolition permits to build on the southeast corner of the Forest/South University intersection. The owners of Pizza House also are marketing development rights above the restaurant on Church Street.

Amid that climate for new housing near U-M and a still-slugging Ann Arbor office market, the ability to transform space into housing could increase the building’s cash flow by around $100,000 per year, compared to fully leased office space.

Existing apartments at U Towers are priced at $1,029 per month for a studio to $1,699 for a three-bedroom with no living room. Single rooms on a yearly lease are about $700 per month.

If Baldini moves ahead with the residential plan, Henes said, the apartments will be competitive with new construction near campus. They’ll be built around the perimeter of the building, while the center building space will be converted to recreational space for all residents.

The building is a nonconforming use for the property, since it was built before the city enacted height restrictions. It also doesn’t need to provide on-site parking for residents.

City staff supports the request, Kowalski said.

“It seems like a reasonable request, given the marketability of second-floor space in that area," he said.

The building is assessed at $16.3 million, giving it an estimated market value of $32.6 million.

Paula Gardner is Business News Director of AnnArbor.com. Contact her at 734-623-2586 or by email. Sign up for the weekly Business Review newsletter, distributed every Thursday, here.