Arlington Fast-Tracks Vacant Office-To-Housing Reinvention
Across the Potomac River from Washington, D.C., Arlington County’s Crystal City is undergoing its next reinvention, and it’s fueled by policy innovation, real estate pragmatism, and tech-world ambition.
To speed up the conversion of vacant office space to other uses, the county chose a path numerous cities around the country have taken — to ease the costly regulatory process for converting empty office buildings into much-needed housing.
Bethesda, MD-based developer JBG Smith became the first to take advantage of an ordinance Arlington County approved in December that streamlines approvals for converting obsolete commercial buildings to housing or hotels.
The developer will transform one of two 1960s-era office buildings into 195 apartments near Amazon’s East Coast headquarters. Construction is expected to begin at the end of this year. JBG Smith will sell the other building to a different company for conversion to a hotel.
With the new ordinance, Arlington County joined New York City, Philadelphia, Boston, D.C., San Francisco, and several other big cities that have been trying to cull obsolete office buildings by making it easier to convert them into residential. D.C. is second to New York City in office-to-residential conversions.
These conversions aren’t cheap to complete. The need for regulatory relief is real, according to a recent Brookings Institution study of conversions around the country.
Put simply, conversion projects remain expensive, and for the overwhelming majority of the buildings studied, the costs of conversion exceed the value captured from converting them to residential use,” the Brookings research finds.
The study’s research underscores how converting offices to housing is rarely cost-effective without such public policies.
Brookings’ analysis shows that few conversions happen without policy support, and that the most impactful levers range from streamlined zoning to direct subsidies and tax abatements.
Conversion economics are tricky, especially for buildings built after the 1950s. Floor sizes began increasing over the decades, and converting those efficiently into residential units often requires costly solutions that mean reducing a building's square footage.
Demolition, redesign, financing, and regulatory costs often outstrip projected rental returns, so the government’s role in reducing regulatory friction can determine the fate of these projects.
Easing the regulatory environment helps lower development costs, which is essential these days because of persistently high construction costs.
Still, there has to be a market that delivers a return for apartments that is better than what the office space is doing.
In addition to a policy environment that's conducive to conversion, there has to be a residential demand to support that conversion," Jon Meyers, one of the Brookings report's authors, tells The Builder's Daily. "People have to want to live there."
Arlington County data shows an apartment vacancy rate at 5.3%, about a quarter of where office vacancy stands.
JBG Smith has figured out how to make it work for 2200 Crystal Dr., the building it's converting to apartments, now that it has gained approval under the county's adaptive reuse ordinance.
We have thoughtfully designed 2200 Crystal Drive to provide larger, multi-bedroom apartments that are in high demand but currently unavailable in the market,” Matt Ginivan, JBG Smith's co-head of development, said in a statement.
Crystal City's Latest Reinvention
Once known as “Brick Haven,” the southern Arlington neighborhood emerged from its industrial roots of brickyards and factories in the early 1900s, then morphed in the 1960s into a self-sustaining city of mirrored office towers, apartments, and underground shopping villages.
The first “Crystal House” apartment, with its trademark chandelier, lent its sparkly name to the area—and by the late 20th century, Crystal City was a high-rise hub for both office workers and residents, connected seamlessly to the D.C. Metro and Reagan National Airport.
Government agencies and contractors supporting them occupied large swathes of office space until the 1990s, when they began vacating space because of federal cutbacks and consolidation into D.C. locations. In 2001, for example, the Naval Sea Systems Command moved to Washington Navy Yard.
Crystal City’s office vacancy rose to double digits. JBG Smith acquired the two office buildings slated for conversion in a 2017 merger with Vornado Realty Trust’s D.C. office portfolio.
JBG Smith scored when Amazon selected Crystal City for its East Coast headquarters. The developer created a master plan for what is now known primarily as National Landing. Under the plan, the developer has been improving walkability around Amazon’s headquarters and throughout Crystal City and has added retail, restaurants, a water park, and residential.
However, just as JBG Smith advanced its plans to transform Crystal City alongside Amazon’s arrival, an unexpected challenge disrupted momentum—the onset of the COVID-19 pandemic.
The pandemic further weakened office demand as hybrid and remote work became more common, creating a larger glut of office space—a scenario that played out across the country.
Office vacancy has declined not because of demand but through the elimination of office space.
JBG Smith demolished an office building and built two new apartment towers that opened last year. Last year, the developer took three office buildings out of service, two of which are the ones being converted.
Those totaled 618,000 square feet. In its July 29 quarterly report, the company said it took nearly 200,000 square feet of space out of service in another office building and plans to shut it down completely once the remaining tenants move.
With the objective of ultimately reducing our competitive office inventory in National Landing, we expect to help foster a healthier long-term office market while repurposing older, underutilized buildings for redevelopment or conversion to multifamily housing, hospitality, or other complementary uses that will support a vibrant mixed-use environment,” the company said in the report.
With the office market in shambles, Arlington County sought to ensure empty office buildings could be put to better use.
Emergence of an Adaptive Reuse Solution
Arlington’s adaptive reuse policy is the framework behind the pivot. The ordinance streamlines approvals for converting obsolete commercial buildings to housing or hotels, reduces regulatory uncertainties, and introduces flexible standards around density, parking, and community benefits.
The result is a faster path from vacancy sign to vibrant neighborhood, with incentives aimed at making the economics of conversion less daunting for developers.
Combining adaptive reuse policy muscle with private sector drive, Arlington is crafting its next urban act. JBG Smith and other developers, empowered by policy simplifications and encouraged by high conversion feasibility metrics at aging office properties, are building hundreds of new apartments and hotels.
Brookings’ research notes that when conversions succeed, it’s because the underlying market wants what’s being produced. Policy levers are well-targeted to nudge the right projects over the line, not just for returns, but for true community revitalization as well.