Donahue Douglas is already making a big dent in the office conversion space. When founders Don Peebles, a Washington D.C.-based developer and former Carlyle Group and BlackRock partner Doug McNeely started up the investment firm earlier this year, they launched a fund looking to raise $1.5 billion to turn vacant office buildings into residential assets.
Now, the fund is close to finalizing almost $1 billion in commitments, Peebles told the Commercial Observer. The close for that amount is targeted for the first quarter of next year. Types of investors in the fund include family offices, university endowments, state pension plans, wealthy individuals and large institutions. Of the institutions, many are willing to pledge between $100 million and $200 million, said the CO.
The initial target was 10 cities, including Boston, Washington D.C., Atlanta, San Francisco and New York, as reported previously by Bloomberg.
Peebles has put emphasis currently on Washington, D.C. — a market that's dealing with distress, with small businesses closing and retail vacancy ticking up, according to the CO. Yet, he sees that as an opportunity to explore the market. Not too far behind in Peebles' eyes is San Francisco, which ranks second on Donahue's conversion target list, as the city has been dealing with quality-of-life issues. South Florida, Boston, Dallas and Austin are also attractive opportunities, according to Peebles. Overall, Donahue will be prioritizing distressed assets in major markets with strong underlying fundamentals.
“The secular headwinds that exist in office space right now, with structural shifts post-COVID, have created a real generational opportunity to invest in this space," McNeely revealed, according to the CO.
Peebles said in total the fund could lead to about 15,000 new housing units, with at least $4.5 billion poured into apartment projects.
As the nation deals with a housing affordability crisis, transforming vacant office space into residential use has become more prominent. A recent CBRE report found that such conversions averaged 58 per year from 2018 to 2024. In 2025, more than 23 million square feet of office space is in line for conversion to other uses or demolition in 58 markets.
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