The District’s downtown area, its “economic engine,” is going through some transitions, a new report finds.
On Wednesday, the Downtown Business Improvement District released its 2015 report on the state of the area’s real estate and economic activity. The findings, first reported by the Washington Business Journal, paint a complex picture of downtown, which has seen an increase in office vacancies and the number of people experiencing homelessness, but also more workers as well as higher-end retailers and restaurants.
“Office-using employment remained the largest economic sector in Downtown and the city in 2015,” the report explains. “Despite the fact that Downtown and the city reached record levels of leased office space, the Downtown vacancy rate ticked up as the city’s rate slightly improved. Though the city’s office vacancy rate is likely to continue to improve in the next 12 [to] 24 months, Downtown’s rate is likely to slightly increase as several tenants who recently moved out of the BID have been paying rent on space they left behind and this situation will end. Additionally, the federal government, in its efforts to gain efficiencies, is moving out of Downtown to cheaper office sub-markets primarily in the city, but also in the suburbs.”
Still, downtown D.C. remains the third-largest area office market in the country, only behind Manhattan’s and Chicago’s, the BID finds. While “Downtown’s overall office vacancy rate rose to 12 percent in 2015 from 11.7 percent in 2014,” the area added “approximately 2,000 jobs for a record 186,000…or 24 percent of the District’s total employment” in 2015. Four in five of those jobs belonged to office workers, the report says, across sectors. “Downtown also accounted for 16 percent of D.C.’s 2015 employment growth,” it adds.
Residential growth, however, was slim downtown: Only 312 new residents moved there last year, “a modest absolute and percentage increase in residential growth.” That increase pegged the area’s population at just under 10,000 residents “or 1.5 percent of the city’s total population” as of April 2016, according to the BID.
Much of that has to do with the Height Act and other vertical restrictions on building, the report explains:
“Downtown’s relative lack of residential buildings is directly related to the city’s building height restrictions. Consequently, the office market was forced to grow horizontally rather than vertically and office projects are able to pay higher prices for land and buildings than residential projects. Recently, conversions of older office buildings to residential have occurred in a few unique properties in D.C. and have increased housing availability, but property owners have yet to convert an office building to residential in the BID.”
Downtown’s share of residents experiencing homelessness as measured by “nighttime unsheltered counts” has hovered around 20 percent during the winter over the past few years. Homelessness went up citywide:
You can read the report, replete with graphs and charts, here.
Photo and chart via BID report