Vacant offices plus housing crunch How cities try to solve a riddle

Carey L Biron –

From his office in downtown Washington, DC, half a mile from the White House, architect Michael Wiencek can see something most people cannot: vacancies.
“The 1970s building across the street, the four floors I see are all vacant,” he told the Thomson Reuters Foundation.
“I’m looking at another building across the street which has been half-vacant since I’ve been in this office.” While someone walking the streets of the capital would be hard-pressed to recognise it, this region has in recent years experienced the highest commercial vacancy rates in the country, according to the Metropolitan Washington Council of Governments (MWCOG), a non-profit.
And in those empty blocks, Wiencek sees something many do not: opportunity — and a way to help alleviate Washington’s housing shortage.
A September report from MWCOG warned that by 2045 the region would need to build 100,000 more homes than are already planned.
Across the country, “no state has an adequate supply of affordable rental housing for the lowest income renters,” according to the National Low Income Housing Coalition, a non-profit.
Over the past dozen years, Wiencek and his firm have been involved in numerous projects in and around Washington to convert empty office space to housing, particularly for low-income residents.
The economics can be surprisingly feasible, Wiencek said — in part because flat complexes have become so expensive to buy, but also because tearing down and constructing a new, large building is cost-prohibitive.
Converting disused office space also brings residents back to what are often run-down parts of the city, he said.
Fifteen years ago such conversions were a new idea. Today there are more of them, though “not nearly as much as there could be.”

VACANT ‘SURPLUS’
Wiencek has noticed significant interest in conversions from developers across the country.
Policymakers are also paying attention: since October, an official task force in Washington has looked at how the city can encourage developers to convert vacant office space, with the explicit intention of addressing the lack of low-income housing.
Its recommendations are expected early this year.
Washington is something of a bubble because it is a “federal town”, said David Whitehead, a housing activist with Greater Greater Washington (GGWash) — a non-profit advocating for walkable urban communities, and a member of the task force.
Commercial real estate owners have for decades been able to charge high rents to government entities, contractors and non-profits seeking high-class office space downtown, he said.
Yet recent years have seen major changes in the demand for office space, fuelled by the rise of remote working and coworking, and because the federal government has decreased in size.
“The need for office space is shrinking,” a planner with MWCOG warned in 2017.
But, said Whitehead, many commercial real estate owners had yet to accept this new reality. Meantime, city tax penalties for vacant commercial space remain low and hard to impose.
That goes to explain why Washington has a large surplus of office space, Whitehead said — roughly equivalent to two Pentagons, or at least 13 million square feet.
Meanwhile, an official count last year found there were nearly 7,000 homeless people in the city. Most were living in emergency shelters. Nearly half that number were families.
“We have this sitting surplus of office vacancy and draining of affordable housing, so why can’t we figure that out?” he said, although he admitted the task force faced big challenges.
“It’s not an easy thing to convert vacant commercial space to housing in general, and beyond that, we’re now also talking about converting and subsidizing,” he said.

‘BIG BOX’ CONVERSIONS
According to the US Energy Information Administration, a government agency, the country had about 88 billion square feet of commercial floorspace in 2016. It expects that number will reach about 123 billion square feet by 2050.
According to real estate consultancy CBRE, the national commercial vacancy rate currently stands at about 13 per cent.
Which is why, even as Washington assesses its vacant office space, other states are looking at theirs — including fast-emptying commercial spaces such as groceries and “big box” stores that have been hit by the rise of the internet economy.
A pilot project in Florida is looking to convert a former St Petersburg grocery store — which sat vacant for four years — into housing and a venue where low-income entrepreneurs could start a retail business.
Commercial property owners across Florida are finding it increasingly difficult to keep retailers in “large format” stores, the project’s organisers said. That is particularly acute in low-income communities.
“The idea came through thinking about places I pass by quite a bit that stood vacant,” said Ashon Nesbitt of the Florida Housing Coalition (FHC), a non-profit.
“In a lot of low-income communities there are these resources of buildings. Instead of looking at them as liabilities, we need to see them as resources that need to be redeployed in a different way,” he said.
In addition to a “severe lack” of affordable rental housing, Nesbitt said, Florida has experienced widespread closures of retail and grocery stores.
With a grant from the national mortgage-backer Fannie Mae, the FHC is drafting a blueprint that could be used by local governments, developers, housing finance authorities and others across the country for similar conversion projects, said the FHC’s Ben Toro-Spears.
Few models exist in the United States for this type of project, he said, which meant the concept of adapting the building for a different use was new for its owner — a national property owner.
Toro-Spears said the firm was keenly awaiting the proposal.
And, he added, the rising number of vacant commercial spaces — on which owners must still pay taxes, utility bills and other expenses — meant there was potential to scale up the project nationwide.
“These are really large organisations, and if we can demonstrate early on that this can be successful, I think they’ll adopt it pretty quickly,” Toro-Spears said.
Already the two have been inundated with interest from across the state, including from cities and civic groups.
“They continue to ask what’s going on: ‘We have a site. Can you look at this site?’” said Nesbitt.
“It’s definitely something that caught folks’ attention, and people want to see similar things happen in their communities.” — Reuters