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2012 was supposed to be the year that the economic recovery finally picked up steam, the real estate market made a meaningful comeback, and the District’s streetcar started running. None of that happened. 2013 has already seen similar predictions, but with the country continuing to see not-very-impressive job growth, D.C.’s housing and office markets coming off a weak year, and the streetcar pushed back until at least 2014, what the bigger picture looks like is an open question. Still, the trend lines can tell us a few things about what to expect.

If 2012 wasn’t a banner year for the D.C. housing market, there was certainly an uptick in sales activity near the end of the year. “We had a tremendous closing at the end of 2012,” says broker Terri Robinson of Long & Foster, who’s worked in D.C.-area real estate for 42 years and finally saw long-languishing properties change hands in the final months of the year.

“What it tells me is we’ve hit bottom,” says Robinson. “Well, I don’t want to use the word bottom, but prices seem to be on the increase.”

A good sign for the market (though a bad one if you’re looking to buy): Homes are getting pricier. Figures from the Greater Capital Area Association of Realtors show a sharp disparity in new single-family home listings compared to 2011, with low-end housing dropping off and high-end housing picking up. Listings of homes under $150,000 were down 59 percent in November, the latest month available, from a year earlier, while listings above $900,000 were up 59 percent. A similar pattern holds for condos and co-ops.

Lower rents may be in store in D.C. this year as more units come online. According to Chief Financial Office Nat Gandhi, there were nearly 10,000 apartments under construction or marketing as of the third quarter of 2012.

Sandy Paul, senior vice president at the real estate research firm Delta Associates, forecasts that the large supply of new apartments will cause average rents in the city to decline in 2013, “probably in the 2 percent range.” The last decline took place in 2009, when Class A apartments dropped in price by 1.5 percent.

Commercial Real Estate
On this front, you’d think 2013 couldn’t help but be an improvement over 2012. Last year was the D.C. area’s worst on record when it came to office leasing. Net commercial lease absorption stood at negative 3.3 million square feet, meaning that there were 3.3 million fewer square feet of occupied office space at the end of the year than at the start.

So will things get better in 2013? Depends whom you ask. Robinson believes that with the election over, lawyers and lobbyists now have a better sense of the politicians and issues they’ll be facing, so they’re more likely to hire and lease new office space.

“I think the election held things back,” Robinson says. “Maybe next year the issue will be taxes as opposed to energy. So they have to hire people based on that. They’re being conservative.” With the new Congress now underway and President Barack Obama’s second inauguration approaching, that should begin to change.

But Paul is skeptical that the election will change much, particularly since the fiscal cliff debate hasn’t been fully resolved. “There’s no doubt that there has been a lot of uncertainty, but I don’t think it had a lot to do with who was going to win the election or which issues were going to be tackled,” he says. “It had more to do with taxes and spending, and we still don’t have resolution on that.”

One thing the election won’t alter is the smaller amount of office space sought by many firms, as a result of increased telecommuting and workplace sharing and general belt-tightening. Paul believes the “densification of office space” and the delivery of new office buildings will keep office rents static until about 2015.

Former Office of Planning Director Ellen McCarthy calls office downsizing a “tsunami that is changing federal and private real estate demand, and it’s going to have a long-term depressing effect on new commercial office construction.” That’ll mean fewer construction, management, and security jobs, but there’s also an upside. “From a planning point of view, there’s a positive to it in that it should increase retail demand density and street vitality,” says McCarthy, “because you’ll have more people per square foot in downtown and other commercial areas.”

With more than 50 cranes piercing D.C.’s skyline at the end of 2012, the first of the city’s much-anticipated massive redevelopment projects are set to begin opening in 2013.

CityCenterDC, the downtown development of the former convention center site, will deliver its first 216 condos this fall; they’re already on sale for between $500,000 and $3.5 million. Shaw’s CityMarket at O will see the arrival of the shiny new Giant supermarket, an 182-room hotel, and 400 rental units. And Ward 8 will get the first two elements of the St. Elizabeths project, the “gateway pavilion” on the East Campus and the new Coast Guard headquarters on the West Campus.

These projects are all expected to bring new life to neighborhoods in three different stages of development. The eastern portion of downtown D.C., formerly blighted but now bustling, is expected to have about 11 percent more trips through it as a result of CityCenter, according to the Downtown Business Improvement District; McCarthy expects the “transformative” development to attract retail to H and I streets between 7th and 11th. Shaw, which has lagged behind surrounding neighborhoods in development, will get an upscale supermarket (the old Giant there was anything but) and an influx of higher-income residents, for better or worse. And Anacostia and Congress Heights, which currently don’t have much in the way of amenities, will gain 4,400 Coast Guarders and a dining/recreation/performance area.

Each of these developments presents new challenges. Can downtown improve its infrastructure quickly enough to accommodate all the new cars, buses, bikes, and bodies there? Will Shaw embrace its newer, shinier side without disrupting its historic character and displacing its longterm residents? Will Coast Guard employees actually spend time (and money) in Ward 8, and will D.C. residents travel from west of the river to visit St. Es?

One other neighborhood that’s finally catching up to its potential is the Capitol Riverfront. The area around the Navy Yard Metro has recently added three great parks, but residents still don’t have many options for places to eat and drink. That’s about to change. Capitol Riverfront Business Improvement District director Michael Stevens expects about 10 restaurants to open in the neighborhood this year, in addition to other needed amenities, like a dry cleaner and, in early 2014, a Harris Teeter supermarket.

Plus, the neighborhood has an ace up its sleeve as it comes of age: The Washington Nationals, who Stevens says “helped brand our neighborhood,” are coming off a year in which they had the best record in baseball. Another playoff run is expected, which would mean more than the usual 81 nights of fans streaming through the neighborhood.

Photo by Darrow Montgomery