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Washington, D.C. Turns Office Surplus into Housing Boom
With vacancy at a record high, D.C. is rewriting the office playbook, one apartment at a time.
Nina Dale
January 08, 2026
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Good morning. Washington, D.C. is quickly becoming a national leader in office-to-apartment conversions. With over 6,500 units in the pipeline, developers are betting big on housing as office demand falters.
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Which U.S. city ranked as the hottest rental market in 2025?
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Market Snapshot
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Capital Conversions
Washington, D.C. Turns Office Surplus into Housing Boom
A rendering of the conversion of 1825-1875 Connecticut Avenue NW. Courtesy of Handel Architects
The capital is turning its glut of empty offices into one of the country's top hotspots for apartment conversions—second only to New York.
Conversions surge: Washington, D.C. has over 6,500 apartment units in the pipeline from office conversions, second only to NYC. The surge reflects the city’s aggressive pivot amid record-high vacancies (22.8%), a sluggish federal return-to-office, and strong local incentives.
Post Brothers goes big: Post Brothers, a Philadelphia-based developer, is launching what it says will be D.C.’s largest office-to-residential conversion. The $750M project will transform two office buildings near Dupont Circle into 530 apartments, leveraging a prime location and city-backed incentives.
Alternative financing secured: To fund the project, Post Brothers secured $575M through C-PACE financing, which treats energy upgrades like property tax assessments. The alternative financing was key after banks pulled back amid federal job and economic uncertainty.
Challenges still loom: Despite strong demand and a 20-year tax abatement, the project faced an 18-month financing delay. Lenders remain wary amid D.C.’s uncertain outlook and a projected loss of 40,000 federal jobs.
A national trend: Office-to-residential conversions are rising nationwide, with over 70,000 units in the pipeline—three times 2022 levels. But many older buildings face hurdles, from poor layouts to costly redesigns or demolition.
➥ THE TAKEAWAY
Cities in transition: D.C.’s office-to-apartment push reflects a broader urban shift. As cities face empty offices and housing shortages, success hinges on smart policy, patient capital, and bold reinvention.
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✍️ Editor’s Picks
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Investor freeze: Trump is aiming to block institutional investors from buying single-family homes to ease the housing crunch and boost access for first-time buyers.
Migration math: Americans are favoring smaller, cheaper markets over big cities, forcing CRE investors to rethink long-term strategies.
Sharper capital: Foreign investors are back in U.S. CRE, targeting data centers, housing, and high-value micro-markets with precision.
Investor acquisition framework: A 30-day system that top firms use to turn first meetings into real conversations. (sponsored)
Price pause: CRE prices rose 2% in 2025, with little upside expected in 2026 amid stable valuations and high rates.
Return mapping: CBRE’s 10-year forecast reveals CRE returns will hinge on balancing yield and growth, with Midwest industrial and select coastal office markets standing out.
Ponzi properties: The SEC has charged executives at Drive Planning with running a $372M real estate Ponzi scheme that misled over 2,000 investors and funded luxury lifestyles.
Tide turning: Marcus & Millichap CEO Hessam Nadji says 2026 could mark a CRE rebound, as price resets, easing rates, and a retail resurgence start drawing capital back into the market.
Redemption rush: NAV BDCs saw a 200% spike in Q4 redemptions as falling distribution rates and rising interest rate pressure shook investor confidence.
Backend boom: Proptech drew $16.7B in 2025, with funding focused on core infrastructure rather than consumer-facing tools.
🏘️ MULTIFAMILY
Rent report: U.S. rents fell for the fifth straight month in December, capping a sluggish 2025 marked by record-high vacancies, slow leasing, and continued oversupply.
Ground shock: A 450% rent hike at Carnegie House was upheld in court, putting middle-class co-op owners on Billionaires’ Row at risk of being priced out.
Jersey exit: Landmark Cos. sold a 10-property, 540-unit apartment portfolio in North Jersey for $90M, one of the state’s biggest multifamily deals of 2025.
Equity injection: TPG is taking majority control of Lennar’s multifamily unit with a $1B investment, pivoting the platform toward affordable housing.
Funding milestone: Fields Grade and URSA Development secured $150M in financing for The Devan, a 336-unit luxury multifamily project in Jersey City.
🏭 Industrial
Rural reboot: AI-driven data center projects are reshaping rural America, as tech giants convert farmland into infrastructure hubs, raising both opportunities and concerns.
Demand dip: U.S. manufacturing hit its lowest point in 2025 as weak demand, tariff uncertainty, and geopolitical tensions weighed heavily on the sector.
Power crunch: Facing years-long delays connecting to the electric grid, data center developers are accelerating construction by turning to battery storage and on-site power plants.
Storage acquisition: Wentworth Property secured $73.3M from Madison Realty Capital to acquire a 13-property, 7,100-unit self-storage portfolio.
Joint venture: Honda is acquiring LG Energy Solution’s $2.85B stake in their Ohio EV battery plant joint venture as part of a shift in strategy.
🏬 RETAIL
Experience economy: Retailers are shifting from selling products to selling stories, using media tactics and cultural partnerships to stay visible beyond the checkout.
Coffee collapse: Compass Coffee filed for bankruptcy and plans to exit 10 leases as it seeks a buyer amid post-pandemic losses and remote work challenges.
Queens grab: Malachite Group acquired nine retail properties in Rego Park for $66M, gaining control of a 90K SF portfolio with major redevelopment potential along Queens Boulevard.
🏢 OFFICE
Slow climb: L.A.’s office market hit a post-pandemic leasing high in 2025 at 14.3M SF, but with nearly 28% availability, it remains far from pre-COVID benchmarks.
Club comeback: Convene Hospitality Group acquired NeueHouse out of bankruptcy, keeping its NYC coworking flagship alive.
Record refi: Selig Enterprises secured a $245M CMBS loan from Bank of America to refinance 1105 West Peachtree, Atlanta’s largest single-asset office refi of 2025.
Fast food footprint: Restaurant Brands International, parent of Burger King and Popeyes, subleased 43K SF from L’Oréal in Miami’s Waterford Business District.
🏨 HOSPITALITY
Encore expansion: Wynn struck a deal to build two hotels and fund a new rail stop near its Everett casino as the mayor exits office.
Room refusal: Hilton dropped a Minnesota Hampton Inn from its network after the hotel allegedly refused service to ICE agents.
Lease trap: Sonder’s downfall highlights a key flaw in tech-driven hospitality models: fixed long-term leases don’t mix with short-term, cyclical demand.
📈 CHART OF THE DAY
Consumer prices have surged 26% over the past six years, keeping inflation—and affordability—at the center of household concerns and political debate.
CRE Trivia (Answer)🧠
According to RentCafe, Miami topped the 2025 rankings due to intense demand, high lease renewals, and limited apartment availability.
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