Office building boom that remade Washington D.C. screeches to a halt - Axios
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The decades-long building boom that remade Washington D.C. is screeching to a halt, undone by broader construction trends and the legacy of the post-pandemic workplace.
Why it matters: Dizzying construction has reshaped the city, reinvigorated downtown and created bustling new communities.
- It's also disrupted old neighborhoods and unleashed a wave of gentrification.
New office construction in the region has all but stopped; commercial real estate firm CBRE says there's only one new office building scheduled for completion after 2022.
- "The pipeline is dwindling to zero," Randy Harrell, CBRE's Vice Chairman, tells Axios. "In a normal environment we'd see...somewhere between one and two million square feet (of new office space) delivering every year in Washington."
Behind the numbers: Money to invest in new office construction just isn't there, Harrell says. He blames reports of high vacancy rates in office buildings and the pandemic-induced exodus out of major metros.
Both catalysts, he says, make investment firms uneasy about putting money into new projects.
- In response to the pandemic, the District will spend $17.5 million over the next two years to incentivize companies to open shop downtown.
The federal government is key to the future of downtown D.C.
- "In terms of the vitality of downtown, the biggest determinant is probably not leasing activity but whether the federal government will come back to in-person work," said John Falcicchio, deputy mayor for planning and economic development.
- He hopes President Biden's vaccine mandate is a prelude to nearly 200,000 federal employees being called back to city offices.
Yes, but: The home-building pipeline remains strong. Data from CBRE shows there were almost 35,000 units under construction in the metropolitan area in Q2 2021, down just slightly from 36,000 in Q2 2019.
- Any slow-down in construction would exacerbate the housing crunch. Leaders in 2019 had decided that 320,000 new homes were needed in our region over the next decade.
- A couple of new multifamily housing projects in D.C. have been reported over the last two months; including one at the Parks at Walter Reed development and another in Logan Circle.
- Bisnow reported yesterday that one of Mount Vernon Triangle's last development sites was sold to a developer who's planning to build condos.
Zoom out: Meanwhile, Amazon is pouring billions into a project just across the river.
- The company — which was slow to accept remote work into its company culture — says the new headquarters currently has over 2,500 job openings.
Tysons has continued to grow during the pandemic.
- Greater Greater Washington reported that office jobs in the area outnumber residents by three to one, which is just one indication of the development still to come.
Bethesda Urban Partnerships is reporting a variety of new development projects from apartments to offices to mixed-use.
The bottom line: Whether D.C.'s construction boom continues post-pandemic is yet to be seen, but for now the surge of new developments has moved to the suburbs.
Editor’s note: This post has been updated to reflect that Amazon says its new D.C. headquarters currently has over 2,500 job openings, not 1,900.
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