DC’s First Office-to-Residential Project Financed Through Tax Abatement Program Begins Work

SOURCE: CoStar News / by Jon Leckie‍

Plans call for transformation of former Air Line Pilots Association headquarters into nearly 160 apartments

Construction has begun on the first office-to-apartment conversion in Washington, D.C., financed in part through a city tax abatement program meant to bring additional housing to the national capital’s downtown.

The project, located at 1625 Massachusetts Ave., is expected to transform 114,000 square feet of underutilized office space into 157 apartment units. Led by the building arm of National Real Estate Advisors, plans also call for a new penthouse structure to be added to the building’s roof. When completed, the project is expected to be all-electric, and developers said they would be pursuing LEED Gold certification.

National Real Estate Advisors said designs for converting the 1972 building aimed to celebrate the space's former use as the headquarters of the Air Line Pilots Association by retaining the building’s iconic exterior travertine fins and interiors that pay homage to the golden age of aviation. Construction is expected to be completed in the spring of 2026.

“Repurposing 1625 Massachusetts Avenue exemplifies the power of strong partnerships, which are allowing this project to break ground in challenging economic times and developing much-needed housing for the District,” Katie Hartley, director at National Real Estate Advisors’ development division, said in a statement.

2028 target

The project was among the first to be approved for a 20-year tax abatement through the Housing in Downtown program, part of a push by Mayor Muriel Bowser’s administration to add 15,000 new residences by 2028. The program provides tax relief incentives to developers of commercial-to-residential projects in exchange for a portion of units remaining affordable to households earning less than the median family income in the district.

“Through these innovative conversion projects, we are transforming old spaces into new uses … that will bring more people and new vibrancy to our downtown,” Bowser said in the statement.

Projects participating in the program will be required to make 10% of units affordable to households earning 60% of the median family income or 18% of units affordable to those earning 80% of the median family income.

The program is funded through Bowser’s 2023 budget and capped at a total of $41 million, with the amount of available funds increasing through 2028. The mayor’s office estimates the program will help open 8,400 new housing units in downtown D.C. by converting 6.7 million square feet of commercial space to residential uses.

Additional financing for the project included capital investments from National Real Estate Advisors and a $62.8 million construction loan from Bank of America. Plans for the conversion were headed by a collaboration with architects DXA Studio and Eric Colbert & Associates, and designer Gaëtane & Co. Design.

Project pipeline

In downtown D.C., there are currently 12 commercial-to-residential projects in the development pipeline, according to the city. Ten projects have been announced or are under construction. Another two projects are currently leasing.

Other projects receiving tax abatements through the Housing in Downtown program include 1825 and 1875 Connecticut Avenue NW, two buildings that total roughly 1.08 million square feet, are expected to deliver 525 units, with at least 69 affordable units. Additionally, 615 H St. NW, a commercial rowhome and surface parking lot, is expected to be converted under the program into 72 residential units, including at least eight affordable units.

The projects come as other cities around the country, including New York and Chicago, are exploring office-to-residential conversions for outdated or excess office stock. The efforts have become more urgent in recent years as officials grapple with low office attendance rates stemming from the hybrid work trend as well as a nationwide housing shortage that has driven up apartment rents.

Industry professionals have said office-to-residential conversions can be challenging and costly because of such factors as building layout, kitchen gas hookups, and other infrastructure that may be required of a residential unit.