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Need an apartment? Have we got an office for you!

Call it commercial real estate’s grand post-pandemic experiment. From Seattle to Pittsburgh, cities are using tax breaks and other subsidies to get developers to convert office buildings to residences. With more people working from home, cities are hoping to revitalize empty downtowns by turning offices into apartments. The mayor of Washington, D.C., hopes to add 15,000 people to the 25,000 or so residents already living downtown.

Such conversions are expensive – and too few to solve commercial real estate’s growing problems. Office vacancy rates stand at a 30-year high. Investors are seeing lease revenue fall, and the value of their office buildings plunge. Some $500 billion in value has already been lost, according to a study released this week. That spells trouble for cities that depend on downtown businesses for tax revenue.

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With more people working at home, the U.S. office vacancy rate is at a 30-year high. That’s bad for city downtowns – and tax revenues. One partial solution: converting office space to residences.

Still, office-to-residential conversions represent a step in the right direction. One of the cities leading the charge is Chicago.

“It’s important for the resiliency of downtown,” says Cindy Chan Roubik, deputy commissioner of the city’s planning and development department. “It’s important to have people at different hours of the day and with different uses. You’ll have more people here on the weekends, after work hours, and that provides a vitality.”

At the corner of LaSalle and Adams streets in downtown Chicago, the City National Bank and Trust Co. building rises like an elegant monument to the past. Its Doric columns, carved rosettes, and lion’s heads evoke the Classical Revival style popular a century ago. But it’s a deceptive facade.

The bank, whose name still adorns the front, disappeared in a merger 60 years ago. The building now houses two hotels, offices for professionals and a host of nonprofits, and a British men’s clothing store. And after a city competition to reimagine its financial district, the building will soon change again. The offices will give way to 280 residences – studios, one- and two-bedroom apartments, and amenities like a fitness center and even a private dog run.

It’s a small and lonely light in the real estate equivalent of a perfect storm.

Why We Wrote This

A story focused on

With more people working at home, the U.S. office vacancy rate is at a 30-year high. That’s bad for city downtowns – and tax revenues. One partial solution: converting office space to residences.

With fewer workers going to the office, office vacancy rates stand at a 30-year high. Lease revenue is falling, especially in older buildings, and owners are seeing the value of their properties plunge. Since the pandemic, some $500 billion in value has already been wiped off the books, according to a study released this week.

Story Hinckley/The Christian Science Monitor

Chicago’s Classical Revival office building at 208 S. LaSalle St. is being converted to residences with 280 planned apartments in the heart of the city’s financial district.

Developers could upgrade their buildings or convert them to other uses, but in many cases the costs are prohibitive. And a slowing economy, rising interest rates, and tighter lending standards make those conversions even harder. Hanging over them is a cloud of uncertainty: Is the work-from-home movement a permanent change, or just a temporary post-pandemic phenomenon?

Despite this murky outlook, some cities are charging forward with conversion plans and subsidies. With fewer workers to keep their central business districts vibrant, these cities are hoping to replace them with apartment-dwellers and kick-start a transformation of their downtowns.

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