Momentum Grows for DC Office-to-Apartment Conversions

The wave of adaptive reuse projects involving office conversions to apartments continues to grow in Washington, DC, which has a glut of aging office inventory in the middle of a severe housing crunch.

Philadelphia-based Post Brothers—which specialized in office-to-residential conversions—made its entry into the DC market this week with the $228M acquisition of a complex of two Class B office buildings that fill an entire city block near Dupont Circle.

The complex on Connecticut Avenue NW includes the 12-story, 368K SF Universal North building and the 10-story, 291K Universal South building.

Post Brothers plans to convert the 2.5-acre office complex into a residential development in a high-income neighborhood of Northwest DC that has a tight supply of multifamily units.

The assets were sold by JBG Smith, who acquired them in 2017 as part of JBG’s spin-off from Vornado Realty Trust.

JBG Smith recently said in a Q1 earnings statement that it is shifting its DC portfolio to majority multifamily with a significant concentration in National Landing, a thriving tech hub straddling Arlington and Alexandria that is home to Amazon’s massive HQ2 project.

In addition to being Amazon’s development partner in the HQ2 project, JBG Smith has more than 1.2M SF of mixed-use development under construction in National Landing, including 1,583 multifamily units. The company plans to add 2,150 multifamily units and 240K Sf of pre-lease dependent commercial space to the development over the next three years.

A bevy of office-to-apartment conversions have been initiated in Washington in recent weeks, including Foulger-Pratt’s conversion of a 14-story office tower on New York Ave. into 225 apartments, and the conversion of two downtown office buildings into apartments by a partnership of Lincoln Property and Cadillac Fairview.

Washington DC Mayor Muriel Bowser has been a strong advocate for office-to-residential conversions. Bowser has pushing for the rezoning of office-only districts and the introduction of more mixed-use properties in submarkets including the East End, West End and DC’s central business district.

The central business district is filled with old office buildings, including numerous facilities the General Services Administration has vacated. DC officials estimate that as much as 4M SF of office space may be ripe for conversion to multifamily.

Bowser also has established a goal of 12,000 new affordable homes in the District by 2025. She has initiated a Faith-Based Housing program that creates incentives, including predevelopment grants of up to $70,000, for faith-based institutions to encourage them to develop housing on vacant parcels.

The Urban Institute estimates that faith-based institutions own about 450 vacant parcels in DC that could be used to build thousands of new homes.

Bowser also has created a Residential Accessory Apartments Program, which will assist homeowners in creating “accessory” apartments in basements and garages.