When it comes to the economy, the Washington, D.C., metro is a region in transition. The forces that will drive future economic growth in the region will differ from those that have driven growth in the past, according to research by TrendLines.
These MegaTrends are identified in a TrendLines publication, “Trends in Washington, D.C. Commercial Real Estate: A Region in Transition,” which examines trends of 2015 and pivotal forces influencing the regional economy and commercial real estate market in 2016 and beyond.
- THE FEDERAL GOVERNMENT IS AT A CROSSROADS. The influence of the federal government over the Washington metro’s economy – direct employment, procurement, and related activity – has waned dramatically over the past several decades. The region’s economic prospects going forward will necessarily depend far more on the performance of the private sector.
- THERE IS A MISMATCH BETWEEN HOUSING SUPPLY AND DEMAND IN THE REGION. At recent construction rates, the Washington metro is producing 13,000 fewer housing units per year than would be justified by job and household growth. Undersupply is helping fuel appreciation that increasingly prices households out of the market. Two significant demographic cohorts – baby boomers and millennials – are driving the housing market but with different and often contradictory preferences. The mismatch between overall supply and demand and between selection/price and household preference/budgets will be key issues for the region in the coming years.
- THE SHARING ECONOMY. Today, it is possible to take a vacation that includes driving a shared car, staying in a private home, using a rented bicycle, and then returning to work in a shared office space. Two sharing economy examples that directly affect real estate: Airbnb and the hotel industry; and coworking space and its relation to the conventional office market. Looking ahead, Airbnb is expanding into new services that will improve the experiences of both its hosts and their guests and is expected to broaden its strategic partnerships with apartment operators and perhaps even hotel companies. While TrendLines research affiliate, Delta Associates expects co-working to continue to grow and to be a useful component of the office market, it is not likely to replace the vast majority of conventional office space demand.
- COMMERCIAL REAL ESTATE MUST BECOME MORE RESILIENT. Catastrophic events, both natural and man-made, require preparation and a new way of looking at the world. The term that has emerged to describe these efforts is resilience. The commercial real estate community – planners, developers, architects, engineers, construction companies, owners and managers – will need to be more proactive in order to make their assets more resilient and protect their investments.