Washington CRE Market Remains Strong

3/1/2011 | By Carisa Chappell
Commercial real estate in the nation’s capitol has fared better than the rest of the country thanks to low unemployment rates and the stability offered by being the headquarters for the federal government, according to speakers on Feb. 25 at the annual conference on the Washington, D.C. market hosted by the Real Estate Forum and Globe St.com.

With a regional population of approximately 6 million people, the consensus was that a number of areas in Washington benefit from a growing economy, as well as an influx of new residents and businesses.

While the office market slowed some during the recession, the panelists agreed that the areas in and around Washington are on the rebound. The federal government has played a large role in that growth, they said.

“There was very robust activity in 2010, and we project that the federal government will be very active in 2011/2012” said Joe Michel, office leasing broker with Transwestern.

Submarkets expected to witness office construction starts within the next 24 months to 36 months include several regions in Northern Virginia, such as the Tysons Corner area near the Washington Dulles International Airport. “They are likely to be the leader in the spec office market,” said Tim Helming, executive vice president and chief development officer of Monday Properties.

However, much like the rest of the country, the multifamily market in Washington has rebounded much faster. “The office market died much harder and quicker than the multifamily market,” said Scott Melnick, managing director with Jones Lang LaSalle. He added the multifamily market crashed in 2008 and made a comeback in 2009.

“The velocity for multifamily died for a short time,” he said.

While the panelists agreed that condominium conversions in the region added a lot of weight to the inventory of multifamily homes in Washington, Bob Kettler, chairman and founder of Kettler, a multifamily housing developer, said that the impact that been absorbed.

“The newer condominiums being built are going to be much smaller than apartments,” he said. “The scale of the condos needs to be smaller because of absorption.”

Additionally, the military’s Base Realignment and Closure (BRAC) has generated activity in the multifamily market, due to the activity in the areas of Arundel Mills and Rockville Pike in Maryland as well as Lorton and Woodbridge in Virginia, according to Kettler.

The panelists also noted that a number of neighborhoods in the Washington, D.C. area have been transformed to include a mixture of office and multifamily housing space.

“The world and the country has recognized the diversification and gentrification in Washington as a different place, it’s good to work and play and foreign investors don’t see it just as a town of attorney’s and politicians like it used to be,” said Brian Connolly, senior vice president with Akridge.

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