WASHINGTON – Addressing the poor condition of U.S. national infrastructure and Washington’s ailing Metrorail system were highlighted as MegaTrends affecting commercial real estate in 2017 at Transwestern’s 20th annual Washington, D.C., TrendLines®. The event also honored Washington Mayor Muriel Bowser and real estate developer Monty Hoffman, founder and CEO of PN Hoffman, as the 2017 TrendSetters of the Year, an award honoring individuals who have made noteworthy contributions to the commercial real estate industry as a whole and the Washington metro in particular.
The event, which provides an overview of the state of the commercial real estate market and a forecast for the coming year, was hosted by Transwestern and its research affiliate, Delta Associates, along with sponsors PNC Real Estate and Baker Tilly, on the evening of Feb. 2 at the Ronald Reagan International Trade Center. The presentation and report, TrendLines: Investing in the Future, are available for download at www.trendlinesdc.com.
While the MegaTrends were focused on challenges, the report also noted that the Washington economy is poised for continued growth in 2017. According to Delta, another 51,000 new jobs will be created in the region in 2017, with the pace of growth slowly declining in subsequent years. Overall, Delta expects annual job growth in the metro to average 43,600 jobs over the next five years, with the private sector continuing to drive regional economic growth.
When it comes to the office market, Transwestern Managing Research Director Elizabeth Norton noted that the office construction pipeline increased by 78 percent in the District in 2016. As a result, the District now represents over half of the 11.3 million square feet underway in the entire Washington metro.
“As a result of the increased pipeline, tenants reducing space by eight percent, on average, upon relocation, and decelerating job growth compared to 2016, we expect the metro area vacancy rate to rise over the next two years and asking rents to remain flat,” said Norton. “Despite this, there are select submarkets that will turn to landlord favor, such as Bethesda/Chevy Chase in Maryland and Reston in Virginia.”
U.S. Infrastructure: There’s a big problem, but the solutions are complex and costly.
U.S. infrastructure is aging, and the government has not been spending enough to repair, replace and expand it to serve a growing economy. In a study of global competitiveness, the World Economic Forum ranked the U.S. infrastructure system as only 12th in the world, behind Hong Kong, Singapore, the United Arab Emirates, Taiwan and most large countries in Western Europe. President Trump is calling for $1 trillion of infrastructure investment over 10 years, but how that will be accomplished or funded is unclear.
Washington Metro System: Once the District’s jewel, now its dilemma.
At 40 years old, Metrorail is one of the youngest rail transit systems in the country, but unreliable service, mismanagement and safety concerns, along with governance and budget problems, have combined to threaten the system’s future viability. At least four plans to fix the Metro have been proposed by elected officials, business leaders and regional organizations. The four plans involve reorganizing the Washington Metropolitan Area Transit Authority (WMATA), providing reliable funding, letting the federal government take over the entire system, or some combination of these.
Mayor Muriel Bowser
Mayor Bowser was sworn in as Washington, D.C.’s mayor in January 2015 and from 2007 to 2012 served as chairwoman of the Committee on Economic Development as part of the D.C. Council. Under her leadership, the District broke ground on a new entertainment and sports arena and infrastructure development at St. Elizabeths in Ward 8 – the first activity at the site in decades. Her administration also secured 66 acres of the Walter Reed Campus from the U.S. Army for development, which will create over 3 million square feet of residential, office and retail space and bring nearly 5,000 jobs to the city. Because of her work, the city also passed legislation to build the new D.C. United soccer stadium, which will create nearly 900 job opportunities for District residents and is expected to attract one million annual visitors per year and spur more than $1.6 billion in total economic activity.
PN Hoffman Founder and CEO Monty Hoffman
Hoffman formed PN Hoffman in 1993 with a single townhouse conversion, and over the past 24 years has built the company into a real estate development market leader. PN Hoffman was one of the first developers to revitalize the 14th Street Corridor, Logan Circle and Adams Morgan. Today, PN Hoffman is developing several mixed-use projects throughout the region including The Wharf – a $2.5 billion world-class waterfront and the largest transformative development in Washington, D.C. – The Bower at The Yards, Riverside Baptist Church, and The Darcy and The Flats in Bethesda, Maryland.
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