The Future of DC's Commercial Landscape: CPG's Josh Simon on Office-to-Residential Conversions

Written by:

Steve Marcinuk

Date:

01 Apr 2025

Share

Share via Facebook

Share via Linkedin

Share via X

Copy to clipboard

“I think it’s an evolution more than anything,” explains Josh Simon, Principal at CPG, reflecting on the changes reshaping Washington DC’s office market. “More people living downtown is generally a good thing. It makes the downtown area feel more vibrant.”

With 18 years of experience in commercial real estate, Simon brings veteran insight to his role at CPG, a boutique firm specializing in land and investment sales throughout Maryland, Virginia, and DC. The company focuses on what Simon describes as “development focused brokerage” in the middle market, handling transactions ranging from $2 million to $50 million.

This optimistic perspective stands in stark contrast to the doom-and-gloom narratives that have dominated headlines about commercial real estate since the pandemic. While many continue to focus on vacancy rates and abandoned buildings, developers and brokers on the ground are witnessing—and creating—a notable shift that may ultimately strengthen the nation’s capital.

Beyond the Federal Footprint

For decades, DC’s commercial real estate market has been defined by its government-centric nature. “We are predominantly a government-centric market, buoyed by federal workforce, and then of course government contractors who do business with the federal government, and then everything else that spreads off of that,” Simon notes.

But the market is diversifying beyond its traditional federal backbone. With a highly educated workforce and growing private industry presence, Washington DC is positioning itself for a more balanced economic future. As Simon puts it, “This is a phenomenal place to live. Number one, it’s a highly educated workforce, and there are many other opportunities besides working in and around the federal government.”

From Empty Offices to Vibrant Communities

The most visible aspect of this shift is the conversion of underutilized office buildings into residential and mixed-use developments. Simon points to projects like 600 East Street Northwest—a 330,000 square foot former Department of Justice building—as prime examples of this evolution.

“We are getting ready to launch that in the next week or so,” Simon shares. “We’re talking to market rate residential folks. We’re talking to hospitality and hotel operators. We’re talking with office groups, believe it or not.”

What makes this conversion trend particularly intriguing is the emphasis on “placemaking” rather than simply changing a building’s use. For the 600 E Street project, Simon envisions “really place making with a retail anchor on the ground level” that could include a much-needed grocery store in the area.

“Developers are thinking about how they make these assets inviting for people to come to whatever shape and form they become,” Simon explains. “When you create that energy on the ground floor, it really makes everything you do upstairs, whether that is hotel or residential or office, a much more marketable, leasable and financially viable project.”

Another example Simon cites is 1425 New York Avenue, being developed by Folger Pratt. The former office building is now being redesigned with an internal courtyard that allows residential units to face both inward and outward toward the street—a clever design solution for a mid-block building.

Class Divisions in Office Space

The demand dynamics in DC’s office market reveal an increasingly stratified landscape. “The demand for Class A trophy space is high, but then everything else is just precipitously lower,” Simon observes. “There’s just not enough demand there. And so we need to do something with these buildings.”

This bifurcation has created opportunities for innovative developers who can acquire these non-trophy assets at prices that make conversion economically viable. The key, according to Simon, is that “the math has to work. Your basis can’t be too high.”

Market Signals Point to Optimism

While challenges remain, Simon reports a significant uptick in activity since late last year. “I’m busier right now than I have been in five years,” he reveals. This increased velocity suggests the market may be entering a new cycle, with buyers who had been sitting on capital now ready to move forward with acquisitions.

“I think we’re at the beginning of a new cycle,” Simon observes. “I think you’re going to see many acquisitions over the balance of this year, and more next year.”

This renewed activity isn’t limited to office conversions. Simon notes that a warehouse property with development potential his firm is currently marketing is expected to receive “at least 10 offers,” whereas “last year, that same opportunity might have only been three or four.”

The New Urban Vision

What emerges from Simon’s insights is a vision of Washington DC not as a 9-to-5 government town, but as a vibrant, 24/7 urban environment where people live, work, and play. The changes reshaping the office market aren’t a crisis—they’re an evolution toward a more sustainable and dynamic urban future.

“I like what’s happening. I like more residential being built downtown, more people living downtown, because then that’ll feed restaurants and entertainment and other sorts of activities,” Simon says.

This evolution aligns with broader trends in urban development that prioritize mixed-use environments over single-use districts. Areas like DC’s K Street, which Simon describes as “really office buildings… where there’s no sort of nightlife, and there’s no housing,” are prime candidates for this kind of change.

The Residential Opportunity

A key driver of DC’s commercial real estate evolution is the strong demand for housing. Simon notes that there “continues to be a lack of supply in this market for newly delivered residential” with “a ton of demand.”

This demand is particularly strong for townhome and “two over two” stacked townhome products. “All of the national home developers—Toll, Pulte, NVR—are really telling us they do not have enough supply. They are hungry for more,” Simon explains.

This residential hunger is creating opportunities for developers to transform underutilized commercial properties into much-needed housing, especially since “DC is still DC” and “this is a very dense marketplace” where national and local homebuilders want to be.

Looking Ahead

As Washington DC continues its commercial real estate evolution, the market appears poised for significant change. While challenges remain—including high construction costs and capital constraints that have slowed ground-up multifamily development—the overall trajectory points toward a more diverse, vibrant urban environment.

Simon’s perspective offers a refreshing counterpoint to the prevailing narratives of commercial real estate decline. “I believe that markets evolve over time,” he says. “It changes. It shouldn’t be something that stays the same forever… change is inevitable.”

For developers, brokers, and investors willing to embrace this evolution, DC’s changing office market represents not a crisis but an opportunity to participate in the next chapter of the capital city’s development.