A nuanced effort to convert vacant office buildings into residential housing could be a net fiscal positive for the Fairfax County government.
That was the conclusion of an analysis presented to county leaders on Tuesday (Oct. 1). But it arrived with some caveats and some questions from members of the Board of Supervisors.
With office vacancy rates still elevated in the wake of the pandemic, Fairfax officials tasked MuniCap Inc. with developing theoretical scenarios for the revenue and expenditure implications of converting empty mid- and high-rise offices to affordable and mid-priced rental housing.
The firm has done analysis work for the county government on other projects, notably in planning for the Mosaic District in Merrifield.
According to MuniCap President Keenan Rice, such infill development would be a net plus to the government’s finances, at least compared to office buildings that might otherwise remain empty.
“A lot of the infrastructure [to support housing in urban areas] is already there,” Rice told board’s land use policy committee at the Oct. 1 meeting.
Under a generic scenario not based on any particular property in the county, a 270,000-square-foot vacant office building could be turned into 240 units of mid-priced apartments.
The assessed value of that hypothetical property would jump from about $20 million to nearly $80 million, and with tenants in place, there would be a host of other revenue streams for the county to tap into.
Rice acknowledged a key variable is how many of those apartments ultimately would be occupied by families with school-age children.
“We all love children — I love my own — but they create more expenses for the county,” he said.
Providence District Supervisor Dalia Palchik asked why the office-versus-housing comparison only included vacant office buildings.
“What if the office market were to come back? What if you were to fill the office space?” she wondered, adding that the county wants “to make sure we aren’t going too far in one direction” with a sprint toward residential conversion.
Board of Supervisors Chairman Jeff McKay said the county has “only scratched the surface” of potential impacts, but it’s a conversation worth having, as office-to-residential repurposing “moves the needle.”
“The number-one problem filling jobs in our region is the lack of affordable housing,” McKay said. “We hear it everywhere we go.”
While some developers have shown an interest in converting existing buildings to residential, others across the county are moving forward to raze outdated office structures and build housing from scratch.
At the end of 2023, office vacancies in Fairfax County reached 17.2%, up from 13.9% in 2019 before Covid accelerated nationwide trends toward remote work. Northern Virginia as a whole had an estimated 20.2% vacancy rate, as of the second quarter of this year, according to MuniCap’s report.
In comparison, the average vacancy rate for multi-family housing across all of the county’s submarkets is 4.94%, the report found, citing CoStar Market data.
In a presentation to the board’s economic initiatives committee in July, the Fairfax County Economic Development Authority identified 106 buildings with about 12 million square feet of office space — roughly 10% of the county’s 119.5 million total square feet — as “actionable” items, meaning the properties have high vacancy rates or have already been proposed for demolition or reuse.
With commercial properties, particularly office buildings, producing less revenue, the county has started considering other possible tax options, including a meals tax, to ease its reliance on residential property taxes.
Image via Google Maps
