Officials in Louisville want to spend millions to help revive the city’s downtown by helping to convert vacant office space into housing.
These conversions are often costly, leaving a gap between what a lender will provide for the project and its actual cost. By helping to bridge that, city leaders are hoping to get rid of the glut of vacant downtown office space brought on by the COVID-19 pandemic and the popularity of working from home with the new Downtown Louisville Building Conversion Program.
Mayor Craig Greenberg said Tuesday the goal of the program is to “breathe new life” into the Central Business District.
“We want to see proposals that preserve the basic architecture of the buildings that already exist in downtown, but repurpose them, bring them back to life,” he said. “We’re very interested in more people living downtown.”
Office-building conversions are a strategy supported by the Louisville Downtown Partnership, which considers them a part of a 10-year downtown revitalization plan.
Greenberg mentioned three currently vacant structures — the Kentucky Home Life Building, the Starks Building and the Landmark Building — as potential conversion targets.
There is no preset limit for how much the city will spend per project or in total for the program.
Jeff O’Brien, executive director of the city’s Cabinet for Economic Development, said the project proposals they get will determine how much the city spends on incentives. He said the final tally is likely to be “in the millions.”
“Just knowing what we have in our project pipeline, I think we’re probably going to have three or four larger projects,” he said. “We’re filling [funding] gaps here.”
O’Brien said they want to help fund “shovel-ready” projects that could begin within 18 months of receiving the additional dollars. He said the city will have the ability to recover funding if any project doesn’t come to fruition.
Funding for the program is coming from a $100 million pot of money the Kentucky General Assembly allocated to Louisville earlier this year. That is meant to fund six projects, including downtown office conversion, a Community Care Campus for families experiencing homelessness and development around the Lynn Family Stadium. The city has already set aside about $22 million for the care campus.
Developers must submit their applications for funding to the city by Feb. 10, 2025.
City officials said vacant office space does not have to be converted to residential use to get the incentive, although they prefer developments that would add to the city’s housing stock. Louisville officials also say they want to prioritize projects to convert completely vacant buildings and developments that include affordable housing.
Data centers and storage solutions projects are not eligible for the program.
About 22% of downtown office space currently sits vacant, according to the Louisville Downtown Partnership. That’s up from 16% in 2019. Downtown’s highest-quality office space, dubbed Class A, has an even higher vacancy rate: about 26%.
Cities across the United States have turned to office space conversion in recent years to combat high vacancies in their downtowns. And while it may sound like a simple solution, it’s an expensive, complicated and time-consuming process in reality.
