Cities Move to Finance Office-to-Housing Conversions Amid Vacancy

A Downtown Building Gets a New Purpose

A city financing plan to convert a vacant downtown office tower into housing has cleared its first legislative hurdle, with the 14-story east tower of the 310W Building slated for redevelopment into studio, one-, two- and three-bedroom apartments 1. The project reflects a broader municipal push to address stubbornly high office vacancy by steering public financing tools toward residential conversions rather than leaving aging commercial towers empty.

A Nationwide Vacancy Problem

The scale of the challenge is stark in some markets. In Portland, downtown office vacancy reached 29.6% in the second quarter of 2026, prompting the City Council to revamp zoning rules specifically to make office-to-housing conversions easier to execute 2. That figure underscores why cities are increasingly willing to attach financing incentives, zoning relief, or both to projects that repurpose empty office space, rather than waiting for traditional office demand to recover.

The vacancy crisis is not confined to city centers. In suburban Milwaukee, the Pinnacle I and Pinnacle II office buildings in the Bishop's Woods office park were sold through foreclosure, the latest in a series of distressed office sales in the area, signaling that lenders and owners are increasingly forced to write down or offload underperforming commercial properties 3. Foreclosure sales like these often serve as a precursor to redevelopment, since new owners acquiring distressed assets at reduced prices have more financial flexibility to convert or repurpose buildings than the original owners did.

Shifting Uses, Shifting Risks

The transformation of office space extends beyond housing. In New Jersey, reporting has tracked how changing work patterns have led some office buildings to be demolished entirely to make way for warehouses, reflecting the rise of e-commerce and logistics demand as an alternative use for underutilized commercial real estate 5. In Charleston, city officials demolished two vacant buildings — including a former chapel and an assisted living facility — in West Ashley to build new government offices closer to a growing population, illustrating that not all vacant-building strategies point toward housing; some municipalities are consolidating or relocating their own operations into new construction 6.

The human dimension of vacant office space also surfaced in an unrelated but sobering incident: a former acting U.S. attorney was found dead inside a vacant office in a San Diego federal building after being reported missing 4. While unconnected to the redevelopment trend, the case is a reminder that emptied-out office spaces carry consequences beyond balance sheets.

Why It Matters

Taken together, these developments show cities experimenting with multiple tools — financing incentives, zoning overhauls, foreclosure-driven ownership changes, demolition and rebuilding — to address the same underlying problem: a glut of office space that no longer matches post-pandemic demand. Whether through housing conversions, warehouse redevelopment, or government relocation, municipalities are increasingly treating vacant office stock as inventory to be actively repurposed rather than a temporary market fluctuation to wait out.