These are the buzzy neighborhoods that are quickly adding amenities to serve the new arrivals — restaurants, sidewalk cafes, grocery stores and movie theaters.
But the population boom, which is now likely waning, has missed certain neighborhoods in the city and the suburbs, leaving places with an abundance of office space feeling decidedly dated. Once all the workers from south of Dupont, parts of Foggy Bottom, L’Enfant Plaza and other federal enclaves south of the Mall shuffle home at the end of the day, the streets are quiet. Retailers close up early.
These areas still feel like Washington in the mid-1990s, while the rest of the city has dramatically evolved.
Having people live in every corner of a city isn’t a necessity, but uninhabited areas often don’t fulfill their economic potential. Neighborhoods with residential buildings in the mix attract the best restaurateurs and retailers, and accelerate public and private investment in services, parks, transportation and other improvements. The city collects less tax revenue when shops shutter at 6 p.m. and population growth slows.
That discrepancy has some pushing for incentives that would encourage property owners to convert office buildings into residential buildings. And for the first time perhaps in a generation, the economy offers a compelling reason to do so.
For one, Washington’s normally gangbusters office market hasn’t been hot for more than a year. Leasing is flat. Vacancy is over 11 percent, a mark still below the national average but which has been on the rise. Things are much worse in such office-heavy areas as Crystal City, where the vacancy rate is over 18 percent.
Second, the apartment market is still strong in a lot of areas, and the District’s new mayor, Muriel E. Bowser (D), has made reducing the cost of housing a key priority. Adding new units downtown may not help lower-income residents make ends meet, but every time the housing stock increases, it puts downward pressure on rents across the wider area.
Such projects are happening quickly in other cities, sometimes with the help of public incentives. In the past decade, 44 buildings in Los Angeles have been turned residential, according to an analysis by the services firm JLL, and 27 buildings in Philadelphia have been converted.
MRP Realty, a D.C.-based company, opened an office in Philadelphia and is scouring the city for old office buildings that can be turned into apartments. The rule of thumb there, according to MRP’s Charley McGrath: “If you can convert it to residential, you do.”
One of the recently converted downtown Philadelphia buildings, the Icon apartments, features art deco design from the 1920s and is surrounded by bars and shops like Urban Outfitters. It has become a popular place to live for University of Pennsylvania students, including Madalyn Vaughn, a first-year law student who moved from Alabama.
“It’s a beautiful building. Everything I need is pretty much around here,” she said.
A few D.C. building owners have made similar conversions for the Woodward Building apartments, on 15th Street NW, for 11141 Georgia Ave. in Wheaton and for two buildings in Crystal City. And last year, home builder EYA turned an empty office building overlooking the Potomac River into the Oronoco condominiums.
“We were looking online for typical family-style homes. But when I saw that it was single-level and built on a concrete slab, I knew my kids would never bother anyone,” said Stella Choi, who purchased one of the units at the Oronoco with her husband, John.
Just recently, a few other companies announced plans to turn old offices into homes. One developer said it would change 1255 22nd St. NW, south of Dupont, into apartments. Another announced plans to turn a West End building, at 2501 M St., into luxury condominiums.
But for the most part, Washington still badly lags in office-to-retail conversions, for two reasons.
First, there isn’t a wide local stock of the kind of funky old structures that developers in other cities have converted into trendy lofts or flats. Many buildings in the District have large floor plates, which can require cutting an atrium into the middle of the building to give all the units windows. But that’s a costly move that reduces a project’s total square footage.
Others have such low ceilings or unappealing exteriors that developers may have trouble enticing people to live there.
“D.C. doesn’t necessarily have a ton of industrial, warehouse-type buildings that make for the kinds of buildings that people really want to live in,” said Toby S. Bozzuto, president of the Bozzuto Group, a top home builder.
Not only that, but a boxy, efficient office building remains the hallmark of Washington real estate from a financial perspective. Downtown areas have historically been in such high demand by the federal government and private companies that in most cases, the best way to maximize the value of every square foot is still to rent it as offices — particularly for developers who have never built apartments before.
“It still makes much more sense to take the properties with vacancy and just turn them into better office space,” said Douglas J. Donatelli, chief executive of developer First Potomac Realty Trust.
There is an effort underway, however, to help building owners see the potential in residential conversion. Two years ago, John Sikaitis, managing director of research at JLL, made a keynote presentation at the annual meeting of the Golden Triangle Business Improvement District, the business group that manages the commercial area south of Dupont.
Sikaitis made the case to the BID’s members — most all of them property owners — that for the neighborhood to advance, it needed to find buildings that could accommodate new housing before it fell behind booming corridors like Penn Quarter, east of the White House.
In an interview, Sikaitis said that parts of the region are “craving reuse and conversions” and that local jurisdictions looking to add new residents, reduce housing costs and enliven neighborhoods ought to encourage private landowners to do more.
“It could make the emerging neighborhoods become kind of affordable for the 22-year-old, the 24-year-old, the 28-year-old who’s running a nonprofit,” he said.
Rosslyn, Sikaitis added, is another example of a neighborhood where the office market is struggling, in part because it lacks the amenities that often arrive only after residents do. “There is literally nothing worse than walking around Rosslyn. It has no character. It has no livable kind of feel to it,” he said.
Arlington County officials are trying to resolve this through the “Realize Rosslyn” planning initiative, which calls for adding 4,000 to 5,000 housing units around the Rosslyn Metro station by 2040. A draft plan says the neighborhood’s glut of office space is “limiting the district’s overall vibrancy on nights and weekends.”
That, however, may not be enough to persuade real estate owners to take on the transformation themselves. One of the first people to visit Bowser’s economic development team was Leona Agouridis, executive director of the Golden Triangle BID, asking about how the city might support conversions. Incentives in other cities include tax credits and abatements to lessen the cost.
“We think there is just a little bit of a catalyst necessary,” Agouridis said.
Brian T. Kenner, the District’s deputy mayor for planning and economic development, said there were no formal proposals on the table but that “to the extent that any idea may be able to increase our ability to offer affordable housing, we are going to take a look at it.”
Sikaitis said that the time to act is now, particularly in such areas as Golden Triangle that go dark when the workday ends.
“The city needs to be looking at specific blocks, and I would argue even specific assets, and literally start to slap these owners over the head with potential incentives,” he said. “Otherwise, nothing is going to happen.”