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Converting Offices to Residences

Though the Covid-19 pandemic has emptied a lot of downtown offices. Many Developers are leaning toward repurposing their office buildings to residential units. D.C. officials have are asked many developers what they need to make these projects work?

Mayor Muriel Bowser’s administration is looking for input to design a program to encourage more conversions of the District’s central business corridor, from business to residential.

The deputy mayor's office plans to accept recommendations from developers about specific properties where a conversion might make sense, and create an incentive structure powering conversions across downtown D.C.

But there are some concerns from developers. Even if the idea of office conversions sounds good in theory, many developers worry it’s going to be too difficult to manage in practice. First, land costs in office-heavy areas of downtown D.C. will make any project very expensive — perhaps prohibitively so. Then there are logistical challenges to consider with equipment, traffic, etc. Office floor layouts don’t resemble layouts for apartment buildings; there are all kinds of appliances and plumbing to add, driving costs up. Even if an office building is largely vacant, it could still be more tempting for a landlord to simply stand pat and hope office work makes a comeback instead of making a big residential switch.

That’s why most analysts agree there needs to be some sort of extra sweetener from the DC Government to push downtown property owners to make the change. Things like extra density permits for these projects are one option while changing D.C.’s famous height limit constraints is another that officials can consider. Direct subsidies, in the form of property tax breaks, are yet a third and more likely solution.

If the counsel finally moves on tax breaks it will come with the inclusion of specific targets for residential projects where at least 20% of the units are affordable to people making an average of 80% of the area median income. It’s going to be expensive, and difficult but it can be done. According to officials in the mayor’s office, they are making a big, long-term bet on the viability of housing in midtown DC.

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