Government officials in Washington, D.C., want to help owners convert underutilized downtown office space to other commercial uses to help increase foot traffic in the nation's capital.
The Office to Anything program has a goal of helping transform 2 million to 2.5 million square feet of outdated and obsolete office space into retail space, hotels, office space, restaurants and other non-residential uses by offering a 15-year temporary property tax freeze. The program officially is called the Central Washington Activation Projects Temporary Tax Abatement.
“Through Office to Anything, we will transform vacant and underutilized offices into new, productive uses that increase foot traffic, generate economic activity and tax revenue, and bring new vibrancy to DC’s commercial core,” Mayor Muriel Bowser said in a statement.
While conversions of vacant or barely occupied office buildings to residences are gaining momentum, plans and initiatives to reposition them for other commercial uses are less common.
The value of the total tax abatements available is capped at $5 million in fiscal 2027, $6 million in fiscal 2028 and $8 million in fiscal 2029. The cap would grow 4% each year after.
Some owners of D.C. offices already are planning to convert them into hospitality use, including OTO Development. Architecture firm WDG posted plans to convert the 1776 K St. NW building that OTO bought over the summer for nearly $28 million into a 280-room hotel. A representative from WDG referred CoStar News to the owner of the project. OTO did not immediately respond to email and phone requests for comment.
The initiative parallels another program that aims to transform old offices into residential use as the city works to revitalize its downtown district.
There's no shortage of potential candidates. The Washington office market currently possesses a vacancy rate of 17.3%, an all-time high, and the overall availability rate stands at 19.9%, according to a CoStar market report.
Complements residential program
The city launched the Housing in Downtown program last year to convert obsolete office buildings into new housing, Nina Albert, deputy mayor for planning and economic development, said in a statement. “But residential conversions are not always viable for every building, and we therefore are encouraging other uses as well.”
The Housing in Downtown program offers a 20-year tax abatement, and the District estimates a $41 million investment toward it can help bring 6.7 million square feet of new residential use, or about 8,400 new housing units. Participants in that program are required to make at least 10% of units affordable at 60% of the median family income, or 18% of units affordable at 80% of that income.
Under the Office to Anything guidelines, no tax abatements would take effect before fiscal year 2027, and no new real properties would be selected to receive one under this program after Sept. 30, 2030, according to the District's plan. The caps are subject to the availability of funding and are aggregated with previous years.
The period of the temporary tax abatement starts when the repositioning of a property is complete, according to the District.
Repositioning buildings must be at minimum 50,000 square feet and within the "Central Washington Planning Area,” or within 1,750 feet beyond that boundary. Other eligibility and program guidelines as well as application details are available via the District’s website.