The District’s core downtown area had an impressive 2018 overall, the latest annual “State of Downtown” report by the DowntownDC Business Improvement District (BID) says. The BID is a nonprofit funded by downtown property owners, covering 138 blocks and 520 properties.
Among its successes: tourism and development growth as well as the debut of a long-awaited day center for the homeless and the enactment of federal legislation that will allow the city to fix up Franklin Square Park—the under-maintained urban square between 13th, 14th, I, and K streets NW. The homeless center, which opened in late February, is currently serving about 100 people per weekday, and a groundbreaking for the Franklin Square Park project is set to occur this fall. Still, downtown experienced its highest office vacancy rate ever: 12.6 percent.
In the introduction to the report, Neil Albert and Randall Boe, who serve as the president and the board chairman of the BID, respectively, explain: “Despite continued challenges in the office market and additional sectors due to development constraints and other factors, DowntownDC produced a net fiscal impact of $791 million in 2018, enough to fund both the DC Metropolitan Police and [the] DC Fire and Emergency Medical Services departments.”
Below are a dozen economic records (and near-records) discussed in the BID’s 2018 report.
1. A record 9.4 million visitors to downtown’s culture and entertainment venues. This level of visitation was “bolstered by the Washington Capitals’ Stanley Cup win and popular theatre performances, exhibits and other sporting events,” the report says.
2. A record 1.54 million visitors to the Walter E. Washington Convention Center. That was almost 200,000 more visitors than in 2017, “due in large part to the 2018 Major League Baseball All-Star game and related events such as FanFest” held there, according to the report. The convention center may see even more visitors in 2019 thanks to the expected spring launch of Apple’s flagship D.C. store at the Carnegie Library, located across the street.
3. A record 2.3 million visitors to The Smithsonian American Art Museum and National Portrait Gallery. The February 2018 unveiling of the gallery’s new portraits of ex-President Barack Obama and ex-First Lady Michelle Obama are believed to have been a major draw.
4. A record 47.2 million square feet of occupied office space, “mostly due to Fannie Mae moving into Midtown Center.”
5. A record 6.8 million square feet of vacant office space, resulting in a record vacancy rate of 12.6 percent. The report says this is indicative of a “tenant’s market.” Total vacant office space rose by nearly 900,000 square feet between 2017 and 2018, driven by the U.S. Justice Department’s partial move to NoMa. (It plans to vacate another 500,000 square feet of downtown space in 2019.) Notes the report: “This was due to a combination of factors, including densification, the delivery of new or substantially-renovated buildings and federal and private tenants moving to lower rent submarkets in DC and the suburbs.”
6. A near-record 17 construction projects underway totaling $1.5 billion. The projects include office, retail, museum, and public-sector space. “Notably, only two of the projects were ground-up construction with the remainder involving renovations or demolition of existing buildings,” the report says.
7. A near-record $2 billion investment in all classes of office buildings.
8. A record $797-per-square-foot average office sales price, compared to $583 across D.C. Plus a record Class A building sales amount of $1.5 billion. “DowntownDC and DC each set records in Class A average office building sales prices at $964 per [square foot] and $904 per [square foot], respectively,” says the report.
9. A record $1,273-per-square-foot office sale price for 900 G Street NW. This was both a downtown and a D.C.-wide record, according to the BID.
10. A record 6.3 million museum visitors. “DowntownDC museums experienced a 17 percent increase in attendance compared to 2017,” says the report. This visitation came on the heels of a total visitation record of 22.8 million visitors in 2017, the latest year for which data is available.
11. Record condo sales, both in terms of number and price. “The DowntownDC condominium market had a record year in 2018 with the highest recorded number of condo sales and highest condo resale price in DowntownDC’s history,” the BID finds. But “the apartment market was less positive. Rents slightly declined in 2018 for the second consecutive year and the vacancy rate remained unchanged.
12. A record for WeWork, now the District’s largest private office tenant—both downtown and city-wide. As of March 2019, WeWork occupied 580,000 square feet downtown across six locations and 480,000 square feet in the rest of D.C. across eight locations. There were 33 total coworking locations in downtown, totaling 1.2 million square feet, and 48 coworking locations in the rest of D.C., also totaling 1.2 million square feet. (The region had 82 coworking locations with 3.8 million square feet.)
“To be frank, WeWork has saved downtown,” said Austen Holderness, the chief development officer at Carr Properties, during a forum hosted by the BID Friday, when the report was released. “If you take out the ‘WeWork effect,’ there would be negative absorption downtown. Without coworking’s influx downtown, the office market, which is already stagnant, would be in decline.”