WASHINGTON, DC-President Obama is returning to Washington DC in the hopes of forging a deal--any deal--with Congress over the fiscal cliff. The nation eyes are on the Capitol as this drama plays out as the impact will be widely felt—but perhaps most acutely of all here in Washington.

In a recent report Cassidy Turley's Garrick Brown examines the impact DC will feel. He devotes a good amount of word count to the subject, including charts, but his take on the subject can be summed up with the word "painful."

Nationwide, he wrote, under the sequestration scenario, government expenditures for contractors will be reduced by 9% in 2013, turning the contracting world on its head, possibly resulting in 18.7 million square feet of unused space.

That said, the greater Washington DC area clearly has a bulls-eye stamped on its back, he continues, as federal spending accounts for 42% of the area's gross metro product, making it the most exposed market to the proposed sequestration cuts. In addition, 11% of the DC metro's population earns more than $200,000 per year—the benchmark over which Republicans and Democrats are fighting to raise taxes.

More directly, the office sector here would take a sharp hit, as 23% of the private sector office space is either leased by the federal government or by private sector contractors.

In sum, Brown said, should the fiscal cliff be allowed to occur, the DC region would fall into a sharp recession in 2013. "We estimate that the DC metro would cut 28,700 jobs and 1.2 million square feet of office space would be returned to the market next year."

Of course, most people are still banking on some deal, albeit one forged at the 11th hour in 2013. In that more likely scenario, 2013 becomes a tale of two halves, according to the report.

"The first half will be choppy, as uncertainty surrounding policy will plague confidence across all agencies and local private sector groups. But after a longer-term budget deal is signed into law (likely in the spring), the DC region to revert back to being one of the top 5 economies and real estate markets in the country --as it has been for the past 20 years."

Instant Insights /

After the Cliff: What DC Has to Look Forward

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