A Northern Virginia county has adopted rules to make it easier and more cost effective to transform underutilized office buildings to other uses, an issue developers are looking at across the United States.
The Arlington County Board approved a policy and a zoning ordinance amendment to reduce the review time for altering outdated office buildings as vacancies in these properties rise in the area. Arlington County, home to Amazon's second headquarters, is just across the Potomac River from Washington, D.C.
The move by Arlington officials is designed to encourage adaptive reuse, or the reworking of an existing office building for uses such as apartments or hotel rooms. Companies have shed office space in the years after the pandemic, cutting costs to cope with higher interest rates and as remote and hybrid work became more common.
“By rethinking how we use our spaces, we’re strengthening our economy and improving the vibrancy of our community for residents and businesses alike,” Arlington County Chair Libby Garvey said in a statement.
Officials are responding to help owners of vacant or largely empty office buildings figure out what to do with the properties as fewer workers travel into downtowns and visit nearby stores and restaurants. In Chicago, the government is working on plans to shift the city's LaSalle Street from a 20th-century home of trading pits, boardroom tables and posh bankers’ offices to a residential neighborhood with a group of office-to-apartment conversions.
In Washington, the mayor has urged the federal government to call more workers back to the office or cede the unused space for city use.
While not all offices will quality for the program, the move is aimed at easing the effects in one of the hardest hit parts of the region.
Conversion pipeline grows
Brokerage CBRE said it expects the conversion of about 120 office buildings to other uses to be completed across the country this year, with one-third to become multifamily projects. That number is much higher than the average of 45 office conversions completed each year from 2016 and 2023, according to the firm.
"This pipeline indicates higher-than-average conversion completions over the next several years," CBRE said in the report.
The number of buildings in Arlington County that could be immediately affected by these changes is limited, but by increasing the speed with which they could be converted, local officials said they are laying the groundwork to create spaces that are needed and well positioned to succeed in the future.
"This is more than a response to high vacancy rates — this is about positioning Arlington for long-term economic resilience," said Ryan Touhill, director of the group Arlington Economic Development, in a statement.
Arlington faces some challenges in its commercial real estate market, including more than 10.7 million square feet of vacant office space, according to the county.
Last year, CoStar found that Arlington County "has been the single most affected jurisdiction throughout the greater Washington, D.C., region when it comes to office vacancy increases over the past four years."
Vacancy within new construction in the Arlington area is growing as three properties have been completed since the first quarter, according to a third-quarter report from CBRE. Those buildings collectively had 98% of their space available when the report was released, the brokerage said.
A streamlined process
While adaptive reuse had been allowed before, a change in the principal use of a building in excess of 5% of its total square footage traditionally triggered a major site plan amendment. That is “costly, time consuming, and uncertain,” according to a county staff memo issued in October.
"A change of use of this magnitude in a building would have been previously a major site plan amendment, which would take about a year to go through the process give or take,” David Schneider, a land use attorney in Holland & Knight's office in Tysons, Virginia, told CoStar News. “The goal here is with this new amendment, if you can meet the criteria, that the new streamline process would take between 120 to 150 days.”
He added that the goal is to have fully formed administrative regulations, including fees and submission requirements, established by the end of the year.
The application fees are expected to be slightly less than what is currently required when submitting a major site plan amendment, Matthew Allman, counsel with law firm Venable, told CoStar.
Not every single type of vacant office building would be able to take advantage of the recent rule change, though Schneider said it was an “important step” in working with the market to address the prevalence of obsolete office buildings.
According to Holland & Knight, properties that qualify to participate in the new adaptive reuse process must have been occupied for at least five years. The principal use of the building must be at least 50% office, and more than 50% of the office would need to be converted. Also, more than 50% of the office gross floor area within the building would need to change to an alternative use allowed in the underlying zoning.
A study of Arlington’s total office market inventory found at least 70 of the more than 300 office buildings were considered at risk for some form of market distress, the October staff memo noted. Schneider explained that because of the criteria, only a subset of that would be eligible for this specific effort on adaptive reuse.
For example, an office building for sale in the Courthouse area of Arlington, if chosen for conversion, could potentially fall in line with the rule change.