Downtown Denver was inundated with historically high homebuyer demand and a scarcity of available housing throughout the pandemic, and in order to solve an ever-worsening housing shortage, city officials are looking for ways to convert up to 15 downtown office buildings into apartments and condos, The Denver Post reports. Vacancy rates in lower-quality Class B and Class C office buildings in downtown Denver were a higher-than-average 30.2% and 33.7%, respectively at the end of June, but adaptive reuse projects could transform those empty spaces into much-needed multifamily housing units.
Though office conversions are typically more expensive than ground-up construction projects, Denver officials are hoping that the Revitalizing Downtowns Act, a bill recently introduced in the U.S. Senate, could create a tax credit to cover 20% of qualified office building conversion costs.
There are some tools cities can employ to support adaptive reuse, said Tracy Hadden Loh, a fellow with the Brooking Institution. Loh specializes in researching place-making and commercial real estate and has recently been looking into commercial building conversions.
Methods Loh suggested include offering property tax breaks over a fixed period of time, either fully or on the new, higher value of a building once it is upgraded and more valuable than just vacant office space.
“That makes sense as long as whatever use is going into the building is not expensive in terms of the public services it requires,” Loh said. “If it’s a residential building full of kids that might go to school and people who might call 911 then the tax abatement does come as a cost.”