More real estate developers are buying office buildings and converting them to residential use. The most recently-announced project in D.C. is the upcoming conversion of two high-profile, but older buildings on Connecticut Avenue, north of Dupont Circle.
Philadelphia-based Post Brothers, a real estate firm that specializes in residential conversions, has made its first entry into the D.C. market, paying more than $200 million for Universal North and Universal South, at 1825 and 1875 Connecticut Ave. It acquired the buildings from longtime owner JBG Smith.
The 1960s-era buildings, have a combined total of almost 700,000 square feet. The buildings sit on close to 2 1/2 acres.
Post Brothers will begin the redevelopment in about a year and will convert the buildings into hundreds of luxury apartments, some of which will be affordable housing units.
But that is not as easy as it might sound. An office-to-residential conversion is generally a complete gut job.
“When we think about a conversion, we think about the only elements of the real estate that we’re buying that has continuing value for the purpose of the property or its next use are, of course, the land, and the concrete and steel structure, and that’s it,” said Matthew Pestronk, co-founder of Post Brothers.
Office building infrastructure is not designed for residential conversion either. For example, insufficient electrical and plumbing infrastructure.
“You’re going to have 600 bathrooms with 600 hairdryers. Not 60 bathrooms. So you also need to bring in additional domestic water capacity, refuse, all of those things,” Pestronk said.
Post Brothers has had its eye on the D.C. market for several years, and said the opportunity to pursue residential conversions in the District is not because of waning demand for office space.
“It is not getting weaker. We’re not in the office building business, but if we were, I would say the market for new office buildings, which is what people want, is extremely strong. We noticed that older office buildings were having a hard time being leased a decade ago, and we believed there would be an opportunity to buy this real estate and convert it to another purpose,” Pestronk said.
The Universal Buildings conversion will retain ground floor retail. Retail tenants currently include Walgreens, Office Depot, Buca di Beppo, a U.S. Post Office, and a Washington Sports Club.