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It’s election time, and we all know what that means: If Republicans take the White House and the Senate in a sweep, D.C.’s Democrats will flee the city (presumably to Canada), GOP staffers will swarm the suburbs, and the city’s commercial real estate market will boom as lobbyists flock to K Street offices in order to capitalize on one-party Republican rule. Or if Democrats hold onto the presidency and pick up Congressional seats, the government will balloon and the District’s residential market will soar as starry-eyed 20-something staffers colonize yet another formerly blighted section of town.
Well, no. Conventional wisdom may predict massive turnover whenever the White House or Congress changes hands—D.C. is a transient city, we hear election cycle after election cycle—but the numbers and the experts tell a different story. For both commercial and residential real estate, it’s clear that external factors such as the economy, city policy, and demographics have a much larger impact on the local population than elections do.
“I think this is much ado about nothing,” says Gerry Widdicombe, director of economic development at the Downtown Business Improvement District, when asked how election cycles affect office occupancy (or in industry jargon, absorption). “There are many variables that impact office absorption. For example, the city’s housing tax abatements of $3 per square foot in NoMa has helped ‘persuade’ some office developers to build residential instead. LivingSocial’s growth will have more to do with D.C. office absorption over the next two years than the feds.”
At first glance, there appears to be a strong correlation between the real estate markets and the party or parties in power. But any causality is dubious at best.
For example, according to data prepared for Washington City Paper by the commercial real estate research firm Delta Associates, occupancy tanked to a two-decade low in the metro area in 2009, the year Barack Obama took office. But that was also the nadir of the economic recession, when you’d expect a crippled market.
Likewise, peak absorption came late during Bill Clinton’s administration, reaching a high in 2000 before dropping by more than half in 2001. Can George W. Bush be blamed for the collapse, given that it occurred just after his election? Of course not; it’s because of the downturn in the economy accompanying the bursting of the dot-com bubble.
On the residential side, the annual net absorption of shiny, new Class A apartments in the metro area peaked in 2009. Is that because young Democrats flocked to apartments in the city under the new Obama administration, where Republican staffers had previously filled Fairfax subdivisions? Not if you consider that the sharp rise in apartment absorptions began around 2007, after the city’s violent crime rate plummeted to half its level a decade earlier and previously run-down neighborhoods filled up with bars and condos.
“U Street,” says a D.C. government official, “got cool under Bush.”
In a city known for its vulnerability to political winds, the revolving door is in fact partially responsible for the stable real estate market. “Folks who leave the government tend not to leave Washington,” says Sandy Paul, senior vice president and national research director at Delta Associates. “Senior officials often stay and take jobs in the lobbying, legal, and PR/communications sectors, using the contacts and knowledge gained from their government service to help them get a new position. When you’ve been near the center of power, it’s hard to leave town. People change jobs, but not necessarily homes.”
If the conventional wisdom held true—Democrats expand the government and live in D.C., Republicans shrink it (ha!) and live in Virginia—you’d expect to see it reflected in the District’s population. Yet since 1976, in the months following a White House takeover by the party previously outside power, the city has seen slightly smaller growth in its civilian noninstitutional population (in other words, people over 16 who are not in prison, mental facilities, retirement homes, or the military) under new Democratic presidents than under Republican ones, according to data from the Bureau of Labor Statistics.
Likewise, while it’s true that the biggest growth in the city’s civilian noninstitutional population following a presidential election came under Obama, the second- and third-biggest gains were in 2000 and 2004, under Bush—reflecting D.C.’s growing appeal over the past decade and a half more than any political trends. And following the Republicans’ huge gains in the 2010 midterm elections, the population jumped by just about the same amount as after the Democrats’ big 2008 win.
“Regardless of the elections,” says Terri Robinson, a broker at Long & Foster who’s been in the D.C.-area real estate business for 42 years, “we’re finding ourselves in a terrific market.”
Another area where you’d expect to see sharp changes in the use of commercial real estate is the federal government’s use of office space in the District. But here, again, the changes have little to do with the party in power.
“Despite what any party has said, the government has grown under both parties,” says Widdicombe. “And when government grows, they take more real estate.”
There are other factors beyond the number of federal employees in the District, Widdicombe explains. Clinton substantially reduced the number of federal workers in D.C., but government offices had been so cramped that there was an accompanying increase in square footage per employee, and so the effect on real estate was negligible. Now, Widdicombe says, increases in the size of government may be offset by a diminishing need for all employees to work on-site and a greater willingness to share office space.
“The changes in work habits and technology that allow people to share space, that’s what’ll change federal real estate more than administrations,” Widdicombe says.
Numerous studies have shown a correlation between party politics and D.C. real estate. A study by Jones Lang LaSalle earlier this month found that since 2001, 37.3 million square feet of office space in the metro area have been absorbed when one party controls both Congress and the presidency (2003 to 2006 and 2009 to 2010), compared to just 2.1 million square feet in a divided capital (2001 to 2002, 2007 to 2008, and 2011 to 2012). And according to another study covering the past 20 years, the office market is significantly stronger under a Republican than a Democratic Congress.
But what does that really tell us? Perhaps that lobbying and advocacy come to life under one-party rule; after all, we’ve seen a lobbying slump this year as gridlock has prevented any major legislation from being considered. And why is a Republican Congress better for the office market than a Democratic one? Sure, it’s possible that Republicans’ small-government ideology leads to more services being contracted out. But our last Republican president didn’t exactly shrink the federal government. Instead, it’s most likely just a question of timing: In recent years, Republicans have tended to control Congress during stronger economic times.
“One explanation is just a random coincidence rather than causality,” says Widdicombe. “I think the absorption shown for those periods of time has more to do with a growing economy than who is in power. If you correlated GDP growth rather than when both houses of Congress are under one party, you would get the same correlation.”
While we’re in the business of myth-killing, let’s do away with one more: the notion that urbanophobe Republicans gravitate toward the suburbs when they come to power.
Tell that to Ryan Thomas, who’s lived on Capitol Hill since moving to D.C. after college in 1998 to work for his home-state senator, Republican Conrad Burns of Montana.
“People move to Washington following college and build their lives here,” says Thomas, who went on to work for two other Republican senators, Ted Stevens and Thad Cochran, and is now a partner at Seward Square Group, a consulting firm. “They devote their skill sets to trying to make the world a better place and they love politics and trying to make government work better.”
John Vaught LaBeaume, a libertarian political analyst and blogger who moved to the District in 1992 and is a longtime observer of the city’s political-demographic trends, notes how drastically things have changed over his time here. Back in his early days in D.C., he says, it wasn’t rare for him to be in a room of Republican staffers who all lived in the suburbs.
“Now all of a sudden you have these young conservative Hill staffers with fedoras on, talking about indie rock and moving into Bloomingdale,” LaBeaume says.
Nearly all young Hill staffers, Democratic and Republican alike, prefer the District to the suburbs these days, LaBeaume says.
On the residential side, then, it seems unlikely that a change in power will result in a dramatic shift in the D.C. real estate market.
As for the commercial market: According to a forecast earlier this month from the real estate firm Cassidy Turley, the next 18 months will bring weak overall job growth (with exceptions in lobbying and health care), reductions for the federal government and contractors, and flat or falling effective rents. After that, we’re likely to see stronger job growth, shrinking office vacancies, and 3 percent-plus rent growth.
Not listed as a factor in these predictions? Which party will be in power come January.
Photo by Darrow Montgomery