Step 1: Identify the pronoun.
The word “it” is a pronoun.
A pronoun refers back to a noun mentioned earlier in the sentence (antecedent).
Step 2: Find the nearest logical noun.
Sentence:
\[
\text{“They've just closed the post office and turned it into a coffee shop.”}
\]
The noun that can logically be \emph{turned into} something else is post office.
Step 3: Eliminate incorrect options.
They — refers to people, not a building.
Coffee shop — this is the result, not the thing being changed.
Closed — a verb, not a noun.
Hence, ‘it’ refers to
\[
\boxed{\text{Post office}}
\]