Federal government leasing and investment, coupled with city investments in infrastructure and economic development, have been instrumental to Downtown and DC’s growth, according to panelists who participated recently in the Downtown BID’s State of Downtown public forum. Going forward, the new Convention Center Headquarters Hotel, the CityCenterDC mixed-use project and continued local and federal governments’ investments are among the developments the panelists agreed will enhance the city and Downtown’s vibrancy and ensure competitiveness.
The forum, held annually, focused on Downtown’s current status and economic future, as well as highlights from the 2009 State of Downtown Report. Panelists included William B. “Bart” Bush, regional commissioner of the US General Services Administration’s National Capital Region; David Mayhood, president of The Mayhood Company; Valerie Santos, deputy mayor of the Office of Planning and Economic Development; and Mitchell N. Schear, president of Vornado/Charles E. Smith. Richard H. Bradley, executive director of the Downtown BID, moderated the discussion.
“The BID area is the best of the best,” said Shear, referring to Downtown’s overall economic performance compared to the rest of the city, the region and other major cities. Despite Downtown’s relative strength and continuing role as the economic and fiscal engine of DC, the panelists noted that several challenges remain, including getting the Convention Center Headquarters Hotel built so the Walter E. Washington Convention Center (801 Mount Vernon Place) can operate at full capacity. And although restaurants have flourished in Downtown, retail continues to be one sector of the Downtown economy that lacks momentum and regional success.
Santos said retail is top of mind for the city, particularly the CityCenterDC project, Downtown’s biggest retail opportunity with 240,000 SF of retail planned. The city and the Washington Convention Center Authority (WCCA) are providing about $205 million of the $537 million that is needed to build the Convention Center Headquarters Hotel, including bonds.
In addition, DC will continue to make infrastructure investments, including in alternative transportation modes such as bikes and streetcars—which will help spur economic development—and use several tools at its disposal to ensure the city’s continued growth, she said. These measures include flexible policies and regulations that encourage growth, including property tax abatements for non-profit organizations, residential tax abatements and an aggressive strategy to court private companies such as Co-Star, which qualified recently for a $6.1 million, 10-year tax abatement as a condition of moving to DC from Maryland.
The panelists acknowledged that the federal government has had a stabilizing role in Downtown and the city. Bush said GSA is working hard to better connect the government to the urban landscape but also noted that federal employees—whose numbers will increase between 12,000 to 13,000 over the next year or two—enjoy working in Downtown and DC because of the amenities that are offered here. Schear saluted GSA’s increased interest in making the federal government a positive contributor to Downtown and DC’s urban landscape.
Bush added that GSA has 115 leases, or 6.3 million SF, set to expire in fiscal year 2010, and another 128 leases, or 6.1 million SF, due to expire in fiscal year 2011. The federal government is focused on consolidating its leasing, taking advantage of higher vacancy rates in the commercial sector to execute new leases and renew existing ones and investing in green research and development. Bush’s major concern is that the pipeline of future projects from which to choose will be reduced.
As for the overall office market, Shear said it will take “a couple of years” for office space demand to catch up with supply, therefore a tenant currently looking for space “in areas that are overbuilt can get a good price” in this market. He also added that DC must compete at the margins or it will lose office tenants to suburban office markets.
“In the 1990s, we talked about creating a living Downtown,” said Mayhood. “That conversation is behind us now.” He said the condominium market is in recovery, with highly compensated young adults driving demand, and condominiums are no longer the affordable housing alternative—they are now a lifestyle alternative. The influx of more grocery stores, such as the Safeway at CityVista, will lead to a dramatic increase in residential growth, particularly in emerging areas.
In conclusion, the panelists said aggressive marketing to spread the word about DC’s business-friendly policies and the economy’s overall health is critical to ensuring and enhancing future growth.