Mayor Ted Wheeler Wants Developers to Convert Downtown Office Space to Apartments

WW has learned Portland Mayor Ted Wheeler’s office is crafting a city ordinance that would incentivize owners and developers of vacant office space downtown to convert those buildings to modestly priced apartments.

A copy of the draft ordinance obtained by WW proposes that the city waive development fees if building owners and developers agree to convert office space to residential space.

In short, the mayor’s office is proposing a mutually beneficial solution for the civic future of a hollow downtown core and building owners who are stuck with vacant office space in the once-bustling central city.

The conditions for waiving fees? Convert a building to apartments with a promise to keep it “workforce affordable housing”—meaning the occupants make 120% or less of the median family income—for a minimum of 15 years.

A recent study that compared downtown Portland’s recovery to that in other major U.S. cities sent the mayor’s office into fix-it mode.

In that study, researchers at the University of California, Berkeley, studied cellphone data in downtown cores. Portland ranked 60th out of 62 cities studied.

In notes by the mayor’s office about the need for such an ordinance, staffers wrote: “Given post-pandemic remote work and hybrid office trends, local office leasing agents predicts needed office space will shrink by 30 percent, which is consistent with other national forecasts. Limited long-term demand for office space means that existing buildings and spaces will continue to go unused for years to come without new investment.”

That presents an existential crisis for Portland: If private companies won’t bring their employees back, what does the city do about vacant office space and lack of foot traffic downtown?

“The economic health of this area has major implications for the broader vibrancy of the city, the state, and the regional economy,” staffers wrote. They estimated 32 office buildings in the downtown core have 70% or higher vacancy.

The ordinance proposes waiving system development charges, which are costly one-time fees levied against developers when they build new structures, convert buildings to another use, or seismically upgrade buildings to make them earthquake safe. (Many office buildings downtown are not seismically retrofitted.) The development charges go toward parks maintenance, transportation, water and environmental services. The charges are hefty, especially for residential units.

Sources in the mayor’s office say the ordinance may, in its final form presented to the City Council, expand the fee exemptions outside the downtown core to apply to buildings across the city.

Last week, WW explored a dozen properties around the city that have stood vacant for years.