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Long Beach Considering Incentives, Tax Breaks To Jolt Office Market

Long Beach

Long Beach City Council members voted this month to explore possible solutions for its growing downtown office vacancy issue.

Staff will study tax incentives for converting office space into housing as well as consider tax and fee breaks to bring businesses back into the city core, CoStar reported

The city is bracing for things to get worse before they get better. Downtown Long Beach has 8.5M SF of offices, 16% of which was vacant as of November, according to CoStar data. There is no under-construction office space in the neighborhood, and according to city documents, 16% of businesses in the area are planning to scale back there by the end of the year.

Many cities are grappling with the fact that their downtowns may never again be able to rely on the heavy foot traffic that office workers once brought. National office usage is stagnant, hovering at around half of what it was prior to the pandemic. 

With a persistent shortage of housing that renters can afford, residential conversions have seemed like a logical use for the increasing supply of unused or unwanted office space in downtowns across the country. But the costs and difficulties of these conversions have kept this solution from being widely implemented. 

"The office market, especially in a downtown, is not dead, but communities need to adapt to a new, likely reality that employers may need less office space than in the past," Downtown Long Beach Alliance CEO Austin Metoyer told CoStar.