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Washington D.C. Considers Conversion Incentives

by Tom Branham, Washington D.C., February 2018


In an effort to bring down Washington D.C.'s office vacancy rate, D.C. Council is considering tax incentives to persuade developers to turn aging office properties into apartments and condos.


The successful repurposing of older office properties into residences has been happening for over a decade in different parts of the country. More than 37.5 million square feet of older office space that has reached functional obsolescence has been converted to residential use nationwide, according to JLL commercial real estate services.


This conversion trend is happening without the use of government incentives in the nearby suburbs of Maryland and Virginia. But in the District, officials say the shift will only occur with government help.


Proposed Legislation


Washington D.C.'s office vacancy rate is expected to continue climbing in the years ahead, especially with the departure of over one million square feet of federally-leased space.


D.C. Councilman Jack Evans introduced a bill that would provide a tax abatement of up to $20 per square foot for ten years to enable office-to-residential conversions. The Mayor would be able to approve property tax abatements not to exceed $5 million annually.


The bill stipulates that 8 percent of the units must be affordable to households making up to 60 percent of the area median income. It also requires the establishment of a Mixed use Neighborhood Advisory Board. Public hearings have been held but a final vote has not yet been taken.


Neighborhood Support


The bill has the support of local property owner associations. The DowntownDC Business Improvement District has made the issue a top priority. In a report released in December, the group called for a program to encourage residential redevelopment of 400,000 square feet of outdated office buildings.


The Golden Triangle Business Improvement District also wants to see more office space converted into homes. "We believe this bill will strengthen the city's tax base while adding residents and ensuring the longtime economic vitality of our downtown," executive director Leona Agouridis told the New York Times. "Mixed-use neighborhoods create a more livable area, better use of infrastructure, and expand the income tax base. It is a policy question: Do we want to have residents in the downtown area? If so, what are we willing to do to help realize it?"