The office market in Washington, D.C. might not be as strong as it was directly following the recession, but that doesn’t mean that other commercial real estate sectors aren’t picking up the slack.
The Washington area is doing just fine, according to a recent report from brokerage firm DTZ. As Kevin Thorpe, DTZ’s chief economist states, “If D.C. is in a recession, it is the single greatest recession I have ever seen.”
Thorpe admits that the office sector is having a tough time. Net absorption has been on the decline since the third quarter of 2013. However, the multifamily and retail sectors continue to show strength. Washington’s GDP is the fifth highest in the nation, and the city’s unemployment rate is 4.9 percent, below the national average of 5.6 percent.
Though the office sector lost 11,500 jobs last year, other commercial real estate assets, such as retail, hospitality, and education, gained 17,600 new workers.
DC’s multifamily market continues to thrive. Net absorption was at 6,849 units, despite new unit construction at record pace. In 2014, 13,876 new apartment units were added to the market, the most ever recorded.
Though other markets may be challenged by an oversupply of multifamily construction, more than 10,000 people moved to Washington in 2013, with even more projected for 2014 [final figures have not been released]. Millennials are moving to Washington in droves, looking to live closer to the urban core instead of in the suburbs.
The increase in multifamily demand of course impacts DC’s retail market. Vacancy rates in most of the region are below the national average of six percent, according to DTZ. Bethesda comes in at a very strong three percent, as well as the Old Town area in Alexandria. Georgetown is at four percent, and downtown Washington is at five percent.
The new City Center mixed-use development in downtown Washington, DC has brought notable high-end openings such as Burberry, Hugo Boss, and Salvatore Ferragamo. More are on tap for 2015, including Momofuku Noodle Bar and Hermes.
So, as it turns out, a small slump in the office market is not hurting commercial real estate overall in the DC area. And, if office bounces back, it will only make the market stronger.
Image Source: www.GlynLowe.com; Flickr