DC’s Commercial Real Estate Market: What’s Ahead

The nation’s capital is capitalizing on real estate trends. During Commercial Observer’s “State of CRE in Washington D.C.” forum, industry experts discussed the recent development, demand and behavioral patterns impacting D.C. real estate.

Held virtually on Sept. 22, the forum consisted of two panels, the first of which — “Looking Forward: Economic Headwinds, Shifting Industry Trends & The Nation’s Capital” — centered around the office

Block spoke about the future of the office with panel moderator Christa Dommers, partner at law firm Seyfarth. Panelists also included Jennifer Burns, executive vice president of asset management and operations at investor, owner and developer Monday Properties; Oliver Carr, CEO at real estate investment trust Carr Properties; and Craig Deitelzweig, CEO of Marx Realty.

Each of these panelists offered a different perspective on the ways offices can attract tenants and stay afloat. Amenities, as per usual, anchored the discussion, though fancy upgrades are especially important in D.C.; the city has the lowest return-to-office rate of any major city. Roughly half of D.C. residents worked remotely in 2021, the highest percentage nationwide.

Although this statistic sounds discouraging, the lag in D.C.’s return-to-office timeline doesn’t have to be — nor should it become — the norm.

“There’s no reason for D.C. to be an anomaly,” said Deitelzweig, noting a dissatisfaction with the numbers.

To entice tenants back into the office, Marx Realty has turned to flashy forms of hospitality, certain to drum up excitement. Specifically, Marx Realty has introduced house cars to properties both within D.C. and New York. The company has brought a Porsche Taycan to Manhattan’s 10 Grand Central and plans a Tesla Model Y for Washington’s The Herald Building. Such additions will hopefully attract more employees to these properties and entice them to do their best work on-site.

The return-to-office debate therefore goes deeper than workplace flexibility. Remote and hybrid models inadvertently can — and have — negatively impacted downtowns. To overturn this economic detriment, landlords and developers must do their part to attract tenants.

It is incumbent upon the city and the government to have people in the office, said Deitelzweig.

Clearly, the pandemic has changed many facets of physical office space, as well as corresponding mindsets. Yet, while fewer employees are sharing a space at any given time, office tenants aren’t necessarily looking to downsize their facilities.

“What we’re seeing is tenants think they want less space,” said Deitelzweig. “And, when they actually start designing their space and they want more conference rooms and more collaboration and larger cafe areas and they still want offices, at the end of the day they’re not smaller.”

Since the pandemic, people’s lifestyles and mindsets about work have changed, leading to new ideas about where they can live. More and more people have opted to move away from cities, while others have chosen to remain proximal, thanks to the amenities and cultural experiences urban areas offer. According to Fluhr, urban proximity has remained a trend throughout major cities; people want to live relatively close to metropolitan areas and retain access to those areas’ offerings during their downtime.