Seattle Mayor Bruce Harrell wants to make it easier for property owners to convert their commercial buildings for residential use, amid a backdrop of a shaky commercial real estate market and the threat of decreased tax revenue for cities.
Mayor Harrell submitted new legislation to the City Council on Thursday that includes exemptions and cost reductions meant to ease the process of office-to-residential conversions.
“While we know there remains a need for office space, this effort will give us flexibility to help optimize our built environment and create the downtown we want to see — a thriving workplace and vibrant community for families and residents of all backgrounds,” Harrell said in a statement. “These changes are a critical step in moving the idea of office conversion to a reality.”
The adoption of hybrid work policies has led to a substantial decrease in commercial real estate property value.
“But the losses are hitting more than just commercial real estate investors,” The New York Times reported Thursday. “Cities are also starting to bear the brunt, as municipal budgets that rely on taxes associated with valuable commercial property are now facing shortfalls and contemplating cutbacks as lower assessments of property values reduce tax bills.”
Seattle is still near the bottom of a list ranking U.S. cities on downtown recovery, as measured by comparing pre-pandemic smartphone location data in 2019 to current levels. Office vacancy rates in downtown Seattle are double compared to 2019.
These trends are driven in part by Seattle’s strength as a technology hub, where many companies headquartered downtown — like F5, Zillow, DocuSign, Qualtrics and others — can more easily rely on remote work.
The City of Seattle itself has a hybrid work policy, requiring its executive branch employees (city offices and departments) to be in the office at least two days a week, except for workers supporting essential functions or those that have approved alternative arrangements.
Harrell has been concerned about the loss of tax revenue.
“I’m trying to encourage employers to get folks back, develop the energy and synergy that we need,” Harrell said at the GeekWire Summit in October 2022. “But the fact of the matter is, there will never be the good ‘ol days where everyone’s downtown working.”
City leaders are considering using revenue from the JumpStart payroll tax on companies such as Amazon to help address a $230 million budget deficit, The Urbanist reported this week.
The mayor is positioning his office conversion proposal as a way to also address housing affordability issues.
“With the recent passage of the State’s sales tax exemption on construction for projects converting nonresidential spaces to housing, this legislation is another powerful tool to tackle the housing crisis and replace building vacancies with vibrancy,” Harrell said in a statement.
The city last year organized a contest for ideas to convert downtown office space to housing and announced winners in June.
Last week Harrell proposed land use code changes to increase density in every neighborhood and allow for more corner stores.
Read Harrell’s full office conversion proposal below.
Seattle mayor proposes legislation to help convert commercial real estate for residential uses by GeekWire on Scribd
