WASHINGTON, DC-It has become a beginning of the year ritual along with the Super Bowl; every year around this time Delta Associates and Transwestern reveal what they believe to be the mega trends facing the Washington DC area’s commercial real estate industry. At this year’s event, being held on Feb. 6 in the Ronald Reagan Building and International Trade Center, six commercial real estate trends will be identified, the 17th edition of the Trendlines publication, “Trends in Washington DC Commercial Real Estate – A New Playbook,” will be distributed and two “trendsetters” in the area will be named.
One area of discussion–or rather, one megatrend to be dissected–we have learned, will be the changing nature of capital inflows into the area.
Nationally, the capital markets have been embracing CRE deals, with CMBS and private equity ramping up originations and commitments. Locally, however–not so much. During the height of the recession the city and surrounding environs was seen as a safe haven for capital flows. Now, weaker property performance, the political gamesmanship on Capitol Hill and the improvement in secondary markets have all eroded Washington’s appeal.
That, however, is just the starting point for the discussion, Phillip McCarthy, executive managing director – Market Leader at Transwestern, tells GlobeSt.com.
“It’s not all or even very much negative. Not at all. The story is about how our market is evolving and how people need to be strategic and smart. There will be winners and losers.”
One example of “being smart”, he says, will be a stronger focus on Millennial demographic trends—another topic of discussion at Trendlines.
It has been easy to succeed in DC’s real estate markets to date, McCarthy continues—but that is changing. “We will not have the benefit of cap rate compression going forward and winners will be very location sensitive. People can’t win merely by just standing around anymore.”