D.C. Pushes Housing Makeover of Its Office-Heavy Downtown

WASHINGTON—District of Columbia officials want to give their downtown a makeover by converting many of its stodgy low-rise office buildings into residential space, though the effort might be complicated by uncertainty around the federal government’s plans for its workers.

Cities across the U.S. have struggled to rebound from the effects of the Covid-19 pandemic, when a shift to working from home hollowed out many downtown cores.

Officials in Philadelphia said a budding resurgence there shows how a downtown with large retail and tourism sectors, where many people live as well as work, can spring back to life faster than those more dependent on commuters. In New York City, officials have proposed parks and promenades for some of the busiest parts of Manhattan.

In the nation’s capital, which is home to about 670,000 people and pulls many workers from nearby suburban Maryland and Virginia, the federal government has an outsize role in the district’s ability to remake its office-heavy downtown into a more residential community.

The federal government owns or leases a quarter of all downtown office space in Washington, giving it an important seat at the table on reuse decisions.

Standing atop the nine-story Vanguard Building downtown on a recent day, John Falcicchio, the district’s deputy mayor for planning and economic development, looked at the progress on a $60 million project. What had been the roof during the building’s decades as Peace Corps headquarters is slated to become communal space for residents of 163 planned apartments, with fire pits, lounges and a dog run, along with a two-level addition featuring a swimming pool and yoga studio.

The apartments, scheduled to open in 2024 with a first-floor restaurant, will bring badly needed street-level vibrancy, Mr. Falcicchio said. “That is what employers are looking for as well,” he said. “Not just what the office building is, but what happens outside.”

 District of Columbia Mayor Muriel Bowser has set a goal of raising the downtown population to 40,000 from 25,000 over five years.

To spur more residential construction downtown, the district plans to roll out a property-tax abatement. To qualify, developers will have to price at least 15% of units so they are affordable to those earning no more than 60% of median family income. Starting in fiscal 2024, $2.5 million a year will be available for the abatement, rising to $6.8 million in fiscal 2027.

The 40,000-resident target is viable with an abatement, and more residents would make downtown’s relatively old office buildings more attractive to businesses, said Tracy Hadden Loh, a Brookings Institution fellow who studies commercial real estate.

Ms. Bowser, a Democrat, has expressed frustration with the federal government’s relaxed return-to-office policy, which has contributed to the district’s 20% office-vacancy rate. In a January speech, she said the government should let local government and others revitalize buildings if they will continue to stay largely empty.

Federal agencies are encouraging telework and hybrid schedules to cut costs, enhance efficiency and better vie for workers, said a spokeswoman for the Office of Management and Budget.

Mr. Falcicchio said even if federal employees do eventually return to downtown offices at higher levels, the district will still pursue more housing. That is because hot neighborhoods such as Capitol Riverfront and NoMa have far higher resident-to-job ratios than downtown, which he said is 92% commercial.

A better balance means people can live closer to their jobs, among other benefits, Mr. Falcicchio said. And he said he hoped downtown could have a similar vibe as NoMa and other growing neighborhoods.

One federally owned site he said is ripe for housing is the long-vacant Webster School building. It sits near Chinatown on a corner that includes a hotel, an office building and the mixed-use CityCenterDC, where officials say the most recent downtown housing was built more than a decade ago. “It would take some significant investment to get it back to productive use,” Mr. Falcicchio said of the old schoolhouse, adding that the district could help by tapping its $400 million-plus affordable housing fund.

The General Services Administration, which acts as the federal government’s landlord, and the Secret Service, located next to the Webster School building, are evaluating the government’s long-term needs for the building, a GSA spokeswoman said.

The GSA is the largest leaseholder within the 138-block footprint of the private DowntownDC Business Improvement District, which is funded by property owners, said Gerren Price, the group’s president and chief executive. Mr. Price said he strongly supports the mayor’s housing target.

“What we’ve seen through the pandemic is that districts that are overly reliant on commercial office space as their key driver just can’t succeed,” he said. However, not all office buildings are suited for conversion, he said, adding that some would have to be razed.

The 188,000-square-foot Vanguard worked well as a conversion in part because of its corner lot at 20th and L streets NW. Gary Cohen, chairman of Willco, the building’s owner, said he initially hoped to find new office tenants after the Peace Corps left. He said he began considering apartments even before the pandemic and locked into that plan by early 2021, after office demand tanked and downtown grew desolate.

“You’ve got to reactivate these areas,” he said.

Units at the renamed Elle will range from studios to three-bedroom apartments. Mr. Cohen said he hopes to attract young professionals, doctors and students.

The building is in the Golden Triangle Business Improvement District, a 44-square-block area. Today fewer than 40 residential units are scattered across its zone, said Executive Director Leona Agouridis. She said she hopes the Vanguard’s first-of-its-kind conversion in the area will serve as a catalyst for many similar projects.

“That is the beginning in my mind of a transformation for the neighborhood,” she said.