Market Overview Unlike most major markets across the U.S., the retail real estate landscape in the Washington, D.C. MSA, which includes the inner-city core as well as Northern Virginia and nearby Maryland, looks quite similar to that of 2006. While most big cities face the issue of too much supply and not enough demand, D.C. is busy developing new centers to keep up with demand. For example, Hines’ CityCenterDC project in downtown D.C., now under construction on the 10-acre site of the District’s old convention center, is a 2.5 million-square-foot mixed-use project that promises to have a major impact on the East End of downtown. The 1.3 million-square-foot first phase, slated for completion in late 2013, is set to include office buildings, condos, apartments, 185,600 square feet of retail, a park and a central plaza. Upon completion, the retail portion will total about 400,000 square feet. Inside the Beltway, 10-acre sites aren’t easy to come by and, given its critical mass, CityCenterDC has the potential to be a game-changer in this market. Two of the city’s waterfront areas are also seeing major development. Thanks to the efforts of Forest City Washington and a host of other developers, the Southeast Waterfront …
District of Columbia
To take measure of the recession’s effect on office transactions in the Washington market, simply watch the city’s tenant base. In a town where the market-wide vacancy rate is 10.8 percent, lessees are being very careful about any real estate moves they make. Tenants who are active are obtaining short-term deals, hoping a brighter day is in the immediate future. “Getting decisions made takes considerably more time than in years past,” says Wendy Feldman Block of Studley’s Washington office. “Although some people feel that tenants are showing less hesitancy recently than they were 6 months ago, it’s very painful getting decisions made.” Hesitancy among landlords also is contributing to the city’s transactional slump. These owners are in financial trouble, but tenants are requiring massive tenant improvement packages and free rent before leases are signed. This culture leaves landlords in a bind; they want to get space leased up, but they also have to make money. If tenants were more prevalent, finding other interested parties wouldn’t be a problem, but the tenant pool has become smaller and smaller. “There are too few tenants for too much space — particularly for those who have requirements that are under 50,000 square feet,” she …
While the recession has impacted NOIs in the Washington area, the local apartment market has weathered the economic downturn better than in most metros. The 60 basis point year-to-date rise in vacancy to 6 percent is the most glaring effect of the recession. Although rents remain resilient, asking rents inched up 0.4 percent in the most recent 3-month period, while effective rents declined for only the second quarter since 2004. Job losses have weighed the most on Class A asking rents, particularly in areas where rent gains were sizable recently, such as Pentagon City/Crystal City, the Connecticut Avenue Corridor and Rockville. The district’s Dupont Circle, Logan Circle and Columbia Heights neighborhoods, however, are notable exceptions to this trend, as these areas remain desirable to renters. Lower-tier asking rents have managed to push higher in many locations, although softer rents and vacancy rents have been recorded in the Anacostia/Northeast D.C. and Stafford County submarkets. Development completions are accelerating this year, and the construction pipeline is expected to remain relatively full through 2010, posing a further threat of concession increases. A metro-leading 9,000 units are under consideration in Virginia, while there are 6,600 units planned in the district and 3,900 units proposed …
Older Posts