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Real Estate Bisnow
January 2, 2013  
WorkSpaces (Left1) DCRE

6 Truths About 2013

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This year will be slow and steady, which means we may have to borrow the University of Maryland's mascot for all DC CRE events. (A terrapin is a tortoise with attitude, right?) Here's what's in store...

1) Landmark Developments
Mary Brady and Tony Williams

Former mayor Tony Williams (with Economic Club exec director Mary Brady) says when the first phase of the $1B CityCenter delivers later this year, it'll “set an important precedent for 21st century urban space.” Tony, who as mayor in 2003 selected Hines and Archstone as developers, is eagerly following Akridge and Amtrak’s Burnham Place over the Union Station tracks and GSA’s revitalization of the St. Elizabeths campus.

Kane (OfficeShred2) MDCRE
Michael Phelps, Julie Chase, Nat Gandhi, and Ernie Jarvis

Tony is now CEO for Federal City Council, which unites business and civic leaders to eradicate the District’s largest challenges. 2013 projects include a roadmap for education initiatives, such as more charter schools, as well as working on infrastructure with local authorities like District CFO Nat Gandhi (second from right with Washington Examiner president Michael Phelps, communications guru Julie Chase, and First Potomac’s Ernie Jarvis).

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2) Small Deals
Keith Styles, December 2012

If 2013 is a good year for office, it’ll be thanks to smaller deals, says Arent Fox’s Keith Styles (ever the optimist, sporting a Capitals tie). A few big government-related deals will advance—the Old Post Office, Walter Reed, and Federal Triangle South—but big, sexy deals take years and won't surface in 2013.

Instead, the less complex, quicker-to-close ones (think more Baltic Avenue, less Broadway) are what will have to drive steady growth, Keith says. And although some investors are straying from the safe haven of Washington for markets in growth mode (Dallas, Seattle, Orange County, Calif.), there should be plenty of equity for DC.
3) Conservative Retail Moves
CityMarket at O

Relatively new shopping centers in the right spots (well-paid residents, TODs) like CityMarket at O will continue to do well, but no new strip centers or malls will come until at least 2015, Keith tells us. And retailers will be much more selective, opting for well-thought-out one-off openings rather than five- or 40-store rollouts.

4) Single-Family vs. Multifamily

A single-family recovery would boost the broader economy but could ding multifamily demand at a time when there’s tons of construction in submarkets like Ballston, Arlington, and Alexandria, Keith says. Look for the beginnings of a condo comeback, too.

5) Less Office Demand
Greg Leisch, November 2012
If the “dysfunctional band of goofballs” in Congress don’t raise the debt ceiling by February, says Delta Associates CEO Greg Leisch, a downgrade by the ratings agencies will follow. A bigger problem, especially for local CRE pros, he says, is jobs: Fewer available ones (as low as 30,000) will mean continually decreasing demand for commercial space than before. And the sectors where growth is possible, like healthcare, will demand smaller space requirements than law firms or other business services, he tells us.
6) Industrial Pulls Its Weight
So where are the CRE bright spots? Greg says industrial might be a dark horse, with a little help from its retail friends. As retailers take less showroom space, he tells us, they’ll need more warehouse product for inventory, adding more demand to an already strong local industrial market. And it’s not just bricks-and-mortar retailers helping out. Online outlets need gigantic warehouses for their distribution centers, he says, and are keen on NoVa.

Warren Dahlstrom Sighting
Warren Dahlstrom at Connecticut and L on Jan. 2, 2013
Colliers US capital markets chief Warren Dahlstrom is always in the center of action. Proving that thesis, we found him moments ago on Connecticut and L, where he told us Canadian bankers recently predicted the biggest surprise of 2013 will be how strong and deep US economic recovery will be. We believe Warren because he's always ahead of the curve, except perhaps for these belated Xmas presents he was on his way to the post office to send to colleagues in Hong Kong.

What's Up at the Chinese Embassy
Connecticut Avenue and Kalorama Road
What happened to the Chinese embassy? You might be shocked, as we were when we drove past Connecticut Avenue and Kalorama Road this weekend, to find the buildings almost gone. We snapped the lone remaining wall, which will be incorporated into a new residential building for the embassy's staff.
Connecticut Avenue and Kalorama Road
Chris Reutershan of DTZ, China's development advisor on the project, tells us remediation and demolition work have finished and the next step is hiring a GC in the next six weeks. Then construction can begin, with an anticipated delivery date of May 2015.
What's your New Year's Resolution? Ours: zumba. Email chris.baird@bisnow.com.
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