Downtown Seattle's 'zombie' office buildings could get second life as apartments under new rules

Downtown Seattle has a lot of empty offices. Vacancy rates in the central business district are at almost 30%, according to a recent CoStar report.

Mayor Bruce Harrell and the City Council want to make it easier and cheaper to turn those buildings into apartments.

The question is how much they're willing to give up in order to encourage developers to get on board.

Modern office buildings still pull in commercial tenants that pay high rents. Older, historic buildings don’t.

Thus, some sit vacant, becoming "zombie buildings" that do nothing to help with downtown's revival. Others get torn down.

But if they’re converted to apartments, they could get a second life. There are several reasons to pursue this, city officials explained at a recent meeting of the city council's Land Use committee:

• People like old buildings.
• Tearing buildings down and starting from scratch wastes resources and takes a long time.
• While it takes a long time to get a new building designed, permitted, and built, conversions can theoretically happen much faster.
• Bringing new apartment residents to downtown could help "activate" downtown streets, filling them with people who shop and eat at restaurants, which can in turn help attract office workers back.

Right now, residential conversions aren't happening in downtown Seattle. That's because the finances don't pencil out.

RELATED: From offices to apartments and back: Could transformable buildings help revive downtowns?

They do pencil out in Tacoma, where land is cheaper. But ask a developer why it won't work in Seattle and they'll give you a list as long as your arm detailing all the costs that would need to disappear to make the conversion of an office building like Smith Tower worth their while.

That's the reason, in part, why Mayor Harrell has included in his downtown activation plan an effort to relax the rules that prevent many office-to-residential conversions from happening. Additionally, a new state law requires Washington cities to relax those rules by 2025.

The current rules which would go away govern things like what size and shape apartment buildings must be, and how much parking they must include.

Safety rules will remain, as will energy regulations. Nobody's suggesting putting residents in leaky old office buildings that cost too much to heat, or that would fall down in an earthquake.

But at a recent public hearing, some city councilmembers expressed concern about relaxing a rule requiring developers to pay into the city's Mandatory Housing Affordability fund, which pays for new affordable apartment buildings.

“Who’s going to be able to afford to live in these buildings?" City Councilmember Cathy Moore asked. "It seems to me it’ll be high-end earners, and that’s not really the population that we so desperately need to be focusing our city subsidies and resources on.”

Moore's concern is not so much that she doesn't want to see more wealthy residents downtown. It's that when the city encourages the preservation of an older building, that prevents the construction of a new apartment building on the same site. And new apartment buildings pay into the Mandatory Housing Affordability fund.

Councilmember Dan Strauss emphasized that reviving downtown is the more immediate need.

“We need people downtown, whether they’re rich or poor,” he said.

There are two main reasons why city officials suggested relaxing Mandatory Housing Affordability fund requirements.

First, it requires developers to pay a fee, but it also grants them a "density bonus," which is the right to build a bigger building. The Mandatory Housing Affordability fund survived legal challenges in part because it theoretically gives as much as it takes. In the case of a historic building, there's no practical way to offer significant density bonuses.

The second reason behind the push to relax the rule is that if such a fee is required, the projects simply won't happen.

But others take the opposite side, suggesting that the rule changes would not be relaxed enough to encourage office-to-residential conversion projects.

RELATED: Meet the Seattle office buildings that could become your next apartment

Consider that the structures most likely to be converted are those built before the 1940s, when office buildings started getting a lot wider, due to advances in fluorescent lighting and central heating and cooling. Those technological changes meant that offices no longer had to be near an operable window to remain cool and comfortable during the summer, or for lighting.

These days, those buildings are notoriously hard to rent out as offices. Most tech companies, for example, want "Class A" office space with all the latest amenities.

The abundance of older buildings is one reason why city officials say Pioneer Square, Seattle's best-known historic district, could become a major hotspot for office-to-residential conversions. Councilmember Tanya Woo said the Chinatown International District also has buildings that would fit the mold.

Ryan DiRaimo, the director of sustainability for the architecture firm for Graphite Design Group, told councilmembers he encourages them to go further with the rule changes. He explained that existing rules, which require a formal review process before landmarked historic buildings can be remodeled, could still sink a potential conversion project, which could lead to those buildings being torn down instead.

"What we’re talking about is saving buildings, and that is preservation," he said. "These older buildings are the most likely candidates for conversion."

During discussions, skeptical councilmembers like Moore appeared to be open to changes that would address their concerns without discouraging conversion projects. For example, there are tax break programs, such as the Multifamily Tax Exemption Program, which require participating buildings to include some affordable units.

City officials estimate relaxing some rules could create 1,000 to 2,000 new apartments across a dozen buildings within seven years.

Ultimately, whether any of those apartments happen at all hinges on whether the city sweetens the pie enough that developers decide to give it a try.