Downtown Honolulu’s biggest office tower, Bishop Place, is slated to become moderately priced rental housing under a plan announced Tuesday.

Douglas Emmett Inc., owner of the building also known as 1132 Bishop, said it aims to convert the property into about 500 residential apartments over a number of years as office tenants leave the 25-story tower at the corner of Bishop and Hotel streets.

Initial homes should be ready for occupancy next year, the firm said.

The work, projected to cost $80 million to $100 million, will make Honolulu’s central business district home to more residents and reduce chronically high office vacancy rates in the market.

“The Douglas Emmett team is focused on addressing the critical need for workforce rental housing in Hawaii, and we are working hard to get through the planning and permitting process so we can begin the conversion,” the company’s president and CEO, Jordan Kaplan, said in a statement. “Bringing hundreds of new residents into the central business district will also contribute significantly to transforming downtown Honolulu into an active 24-hour community.”

Mayor Kirk Caldwell endorsed the plan, calling it a creative way to help address the state’s chronic lack of homes for residents with low and moderate incomes. “We need to build more attainable housing options for local residents,” he said in a statement.

Douglas Emmett said rental studio, one-bedroom and two-bedroom apartments should be affordable to households earning as little as 80 percent of Honolulu’s median income and up to 120 percent of the median income.

Under current income levels, monthly rents could be no higher than $1,634 for studios, $1,750 for one-bedroom units and $2,100 for two-bedroom units at the lower income limit. At the higher income limit, maximum monthly rents would be $2,450 for studios, $2,624 for one-bedroom units and $3,150 for two-bedroom units.

The income limits for a single person equate to $65,360 at the lower level and $98,040 at the higher level. For a family of four, the respective limits would be $93,280 and $139,920.

Even at moderate rents, new homes will help ease a housing shortage for people making close to the median income. Converting Bishop Place also will help improve a weak downtown Honolulu office market.

Commercial real estate brokerage firm CBRE said in a report released Tuesday that the downtown Honolulu office vacancy rate at the end of last year was 18.5 percent, just shy of an all-time high of 19 percent a year earlier.

CBRE said there are discussions about converting multiple downtown Honolulu office buildings to other uses, which stands to reduce vacancy rates and help landlords raise tenant rents.

Douglas Emmett, a California-based real estate investment trust, owns residential apartment projects including Moanalua Hillside Apartments and is also the single largest owner of downtown Honolulu office property. Besides Bishop Place, the firm owns Harbor Court and the two-tower complex Bishop Square. The Honolulu Club office building on Ward Avenue is another company property.

Douglas Emmett said Bishop Place has an occupancy in the mid-70 percent range. The tower has about 490,000 square feet of leasable space, which is enough to create a roughly 49-story tower under a more typical building footprint.

Bishop Place was built in 1992 as Pan Pacific Plaza and took on the name First Hawaiian Tower that year when the bank became the building’s largest tenant. The bank later built its own tower at King and Bishop streets.

A year after Bishop Place opened, its developer filed for bankruptcy, and lenders repossessed the property in 1996. Australian-based Lend Lease Corp. purchased the building for $73 million in 1998 and bumped up occupancy to 80 percent from about 60 percent. Douglas Emmett bought the property in 2004 for about $115 million with local investor Dick Gushman.

The building has 567 parking stalls and is on land with zoning that allows residential use.