Office-to-apartment conversions in D.C. and other metropolitan areas have become a fast-growing trend. The pandemic initiated a major and lasting shift in the workplace, and employers continue to offer remote and hybrid options. Concurrently, developers built offices “at record rates” prior to the pandemic. This ultimately resulted in a mismatch in supply/demand for office space, and as you would imagine, many vacant office buildings.
It didn’t take long for developers to realize they could save a lot of time and money by converting these abandoned spaces into housing. According to a recent study by Rent Café, adaptive reuse apartments rose by 25% over the past two years.
Like so many other U.S. cities, the housing market in Washington D.C. is in transition due to this phenomenon. Whether you’re a developer who’s looking into office conversions or a business owner thinking about selling your space, keep the following in mind.
The State of Office-to-Apartment Conversions in D.C.
D.C. led the nation in adaptive reuse projects in the early years of the pandemic. In fact, 6% of all the adaptive reuse projects in the country have occurred in D.C. The city gained 1,500 additional apartments from converted spaces.
The major advantage of office-to-apartment conversions in D.C. and other cities is the quick turnaround compared to constructing a building from scratch. Additionally, whereas vacant office buildings often lead to deserted city centers, added housing revitalizes downtown areas. There are thousands of square feet of Class B office space with conversion potential in D.C., as reported by the founder of Soto Architecture and Design. This makes the nation’s capital an active and thriving hub for adaptive reuse.
The Challenges Developers Face
It’s important to note that office-to-apartment conversions in D.C. come with their own set of challenges. For instance, different jurisdictions in D.C. have their own zoning regulations. Green energy requirements are also fairly strict in D.C., which can be taxing for developers. Unlike Maryland and Virginia, which allow for mechanical ventilation, D.C. also requires natural air from functioning windows.
The best candidates for conversion are older buildings with historic appeal, but also smaller floorplates. For mid-century or newer office buildings with floors of over 20,000 SF, it can be challenging to lay out hallways for units that still allow for each to have a window. Most would need to blast an atrium through the core, where typically the elevator/stairs are located, and even the District’s high rents may not be enough to justify the cost.
An office building must be deemed viable before it can be considered for adaptive reuse. From that point, many other modifications are necessary. Office buildings are constructed to comply with different building codes. Apartment conversions require updated fire alarms, lighting, MEP (Mechanical, Electrical and Plumbing) systems and many other structural changes. It’s equally important to make renters feel at home because most office lobbies tend to be monochromatic and plain. No one wants to feel like they’re living in a corporate office building. For an apartment building to have curb appeal, amenities like fitness centers, roof decks and common areas will likely be necessary.
Before COVID-19 hit, it was estimated that D.C.’s population would reach 720,000 by 2022. However, D.C. actually lost 20,000 residents in 2021. The rise of remote work minimized the need for office space, but it also allowed workers to move outside their home cities. Some workers are packing up for the suburbs or considering a long-distance move. This could be a challenge for developers in D.C. who are expecting to fill converted apartments.
The Future of Office-to-Apartment Conversions in D.C.
More than likely, there won’t be a sudden demand for more office spaces. All signs point to more flexibility in the workplace and at-home options. Therefore, we expect office-to-apartment conversions in D.C. to continue at a high rate. If the pandemic taught us anything, it’s that change can happen quickly. There may come a time when in-person offices slowly return. For the time being, however, developers will follow demand. There is a higher demand for housing than for office spaces, especially those that are outdated. Furthermore, as apartment buildings bring more vitality to the city, they will attract more renters and remote workers from other locations.
Partner with Willowbrook Valuation & Advisory Services for Expert Investment Assistance
At Willowbrook Valuation & Advisory Services, we are a leader in trusted insight, cutting-edge innovation and customer service. We offer exceptional litigation support to assist clients with insurance valuation, arbitration and consulting, property tax services, and expert testimony. To learn more about our valuation, counseling, litigation services, or office-to-apartment conversions in D.C., please contact us at (202) 919-3888.