D.C. Conversion Wave Tests New Housing Crisis Playbook

Despite ongoing political tensions in the nation’s capital, developers and city officials are pressing forward with converting vacant office buildings into housing as affordability and supply constraints persist.

Washington, D.C., is leading a national wave of office-to-residential conversions, fueled by the COVID-19 pandemic’s reshaping of work habits and the city’s urgent demand for new homes.

One of the most anticipated conversion projects is The Accolade, a 13-story, 280,000-sq-ft former Justice Department office center built near the White House in 1991. Developed by Foulger Pratt, it is set to open in August 2025 as 243 luxury rental units—the closest residential property to the White House.

Four years in the making, the project is a textbook illustration of the challenge of converting office buildings to residential. Once open, though, it could also be a bellwether for the city’s housing market, which is now facing uncertainties after the Trump administration laid off scores of federal government workers, with potentially more coming.   

Spurring Conversions

Since the pandemic disrupted office markets nationwide, cities and states have implemented policies to prime the pump for these conversions, including property tax abatements, relaxed zoning, expedited permitting, and other economic incentives.

D.C. is no different. With the office vacancy rate hovering at 23%, according to Cushman & Wakefield, officials shifted into gear with efforts to revitalize underused buildings and address the city’s housing shortage.

Last year, D.C. launched a program to convert obsolete office buildings to housing, offering a 20-year property tax abatement. Projects must include at least 10% of units affordable to households earning 60% of the area median income or 18% of units affordable to those earning 80% of AMI.

In January, the D.C. government launched an incentive program called “Office to Anything” to encourage building conversions. The program provides 15-year tax breaks for converting offices into other commercial uses, further supporting the city’s goal of adding 15,000 new residents downtown by 2028.

We know that having a balanced mix of uses help make our neighborhoods, including our Downtown, more dynamic,” Mayor Muriel Bowser in announcing the program. “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.” 

The city now ranks second behind New York City nationally for office-to-apartment conversions, with a pipeline of 6,533 future residential units—a 12% increase year-over-year, according to a report from RentCafe.

Empty and Underused Office Buildings

Like many cities nationwide, D.C. office buildings were slow to fill back up as hybrid and remote models proved resilient, even as the government and companies pushed for employees to return.

Since 2020, D.C. has had a $7 billion decline in total assessed value from large office buildings, a decrease of 12%,” DowntownDC, the business improvement district organization, said in its 2024 State of Downtown study, released in April.

The report notes that the real estate property devaluation trend has resulted in $143 million in lost property tax revenue.

According to Kastle, which provides access control technology for workplaces, the average office occupancy rate in D.C. is still about 50%. Kastle tracks 10 major cities, and the average occupancy rate is 51%. Houston had the highest occupancy rate, at nearly 60%.

Downtown D.C. has felt the pinch more acutely because it has the most office square footage per capita.

Retailers have struggled as a result. DowntownDC’s report shows that a quarter of the retail space is vacant.

Adding more residents downtown could resuscitate foot traffic for retail.

According to the Washington DC Economic Development Partnership’s 2024/2025 Development Report, starts for market-rate apartment units dropped to 580 last year, the lowest level of new production since 2009.

The Partnership shows more than 10,434 residential rental and homeownership units across D.C. currently under construction.

Converting a 1990s Office Building

Foulger Pratt’s project will be among the 7,713 apartment units that the Partnership projects will complete and open for occupancy this year.

The developer bought the office building in 2021 for $56 million, $9 million more than the seller paid the previous year, when apartment rent growth and demand were at historic levels.

Cameron Pratt, CEO at Foulger Pratt, told Bisnow the area was developed for heavy office use years ago and left few redevelopment opportunities now, making it difficult for newcomers to enter the market.

This building has a unique floorplate with window heights that lay out well for residential conversion, plus ample below-grade parking,” Pratt said.  

Typically, adaptive reuse for residential purposes involves old buildings with small floor sizes. Developers say these are easier to convert because the apartments fit more easily into the structure's floor plan, mechanicals, and other building systems.

Today, however, many conversions are built in the 1980s and 1990s and have large floor sizes, making it more challenging to carve out space efficiently for apartments.

Willow Bridge Property Company, for example, converted a 1980s office building about four blocks away from The Accolade in downtown into 222 apartments and opened it in February. The same month, it broke ground on a 264-unit conversion of a 50-year-old office building that once housed the Department of Homeland Security.

RentCafe’s report on conversions showed that only 14% of D.C.’s 61.4 million square feet is suitable for conversion.

According to descriptions from Clark Construction and ISI Demolition, the team handling the work, the Accolade’s conversion process was complex. It required extensive demolition, structural reconfiguration, and the introduction of new materials and sustainable practices.

Its design team faced challenges maximizing natural light, updating the building’s skin, and integrating modern residential.  

While Accolade’s existing structure already boasted a full-height, enclosed atrium with a skylight, shaping it into the ideal size to achieve the developer’s vision and accommodate daylight requirements became one of the project’s major challenges,” according to Clark Construction.

Leasing has started at The Accolade, with monthly rents for a studio starting at $3,221, a one-bedroom starting at $3,600, and two-bedrooms starting at nearly $3,900.

It will be testing the higher end of D.C.’s apartment market, where average rents run about $2,252 per month.

Looking ahead, the future of downtown D.C. may hinge on the success of just a handful of these high-profile conversion projects.

If the Accolade and two other major office-to-residential transformations prove viable, they could set a powerful precedent for revitalizing the city’s core, attract new residents, and inspire further investment if the conditions are right.

With each successful conversion, D.C. moves closer to reimagining its downtown as a center of commerce and a vibrant, mixed-use neighborhood.