- Washington D.C. leads most US cities in office conversions, second only to NYC.
- More than 6,500 residential units are planned from office conversions in the district.
- Post Brothers is starting a $750M, 530-unit office-to-housing conversion project.
- Innovative financing, like C-PACE loans, is crucial for these conversions to proceed.
Conversions Gain Steam in Washington
The WSJ reports that office conversions are reshaping Washington D.C.’s real estate landscape. More than 6,500 new units are in the pipeline, making the city a top hub for turning outdated office spaces into housing. Nationwide, only New York City has more conversions underway.
This trend is fueled by a surplus of obsolete office buildings and rising vacancy rates. Government incentives have also made these projects increasingly feasible.
Developer Bets on Office Conversions
Philadelphia-based Post Brothers plans what it calls the largest office-to-housing conversion yet in D.C.—a $750M project on Connecticut Avenue. The development will deliver about 530 rental apartments near Dupont Circle and the Kalorama neighborhood.
The company arranged a $110M first mortgage and a $465M C-PACE loan to move the plan forward, as major banks hesitated amid citywide economic uncertainty and ongoing federal spending cuts. This financing structure mirrors other recent multifamily conversions in D.C. that have also turned to alternative capital sources to overcome lending hurdles.
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Why It Matters for the District
Washington’s high office vacancy rate, 22.8% last year, prompted city leaders to incentivize conversions with tax abatements and zoning modifications. The drop in federal office demand and anticipated long-term job losses further emphasize the need for downtown revitalization through housing.
Developers have faced challenges with complex financing, design limitations, and market adjustments, but recent progress—helped by alternative lending tools like C-PACE—has accelerated the pace of deals.
What’s Next for Office Conversions
Architectural innovations and lower acquisition costs continue to drive the trend. As major US cities like New York, Chicago, and Los Angeles follow suit, more than 70,000 conversion units are underway across the country—three times 2022 levels. D.C.’s experience may become a blueprint for other urban markets adapting to the evolving needs of the post-pandemic city.
