Barren Equity Market For D.C. Development Keeping Projects On Ice

In Washington, D.C., a city that's faced one blow to its economic well-being after another, developers searching for equity are coming up empty-handed. 

Equity investors remain unwilling to put skin in the game in the nation’s capital, creating an environment where projects are unable to get started, panelists said at Bisnow’s Washington, D.C., State of the Market on Thursday. 

“There are a lot of sideline properties that are ready for development,” Urban Atlantic Managing Partner Vicki Davis said onstage at the new trophy building across from Capital One Arena, 600 Fifth St. NW, the only office project to deliver in D.C. last year.  

“I talked to a developer who said, ‘I have a 7% current return development, but it’s on the sidelines because I can’t get any equity to come to D.C.,’” she said.

For would-be equity investors, D.C. is a risky bet right now. The city has been pummeled over the past few years with challenges, from a sluggish post-pandemic downtown recovery to the Trump administration's federal job and funding cuts.

The greater D.C. area lost 103,900 jobs between January 2025 and January 2026, according to Bureau of Labor Statistics data, by far the most of any metro area in the country. 

Paired with what the industry sees as tenant-friendly eviction laws and apartment rents retreating, investors fear the risk is not worth the potential reward. 

“For new projects, you’ve got to deal with the economic reality for equity right now, which is the linchpin, which is extreme conservatism,” MRP Realty principal Matt Robinson said. “Whether it's office or residential, nobody wants to take risk [on] something that they can’t underwrite.”

Construction in D.C. is at a 15-year low, according to data released from the Washington D.C. Economic Partnership earlier this month. Shovels went into the ground for just 3.6M SF of new construction in the city during 2025, a 27% decline from 2024, which was itself an extremely slow year for construction. 

MRP has a number of approved projects that have yet to break ground — including the next phase of its Bryant Street development in Northeast and two Navy Yard apartment buildings next to the Frederick Douglass Bridge. 

“All the developers have multiple additional sites, second phases, additional plans that are drawn, ready to go to permit, projects ready to go,” Robinson said. “Just need financing.”

While that financing may be attainable on the debt side, for equity investors, the risk is just too great right now. 

“Debt is not the problem,” Trammell Crow Co. Managing Director Campbell Smith said. “I think the equity is the larger problem.”

Equity investors need to ensure that the money they put in will generate more value during their investment and lead to gains at exit.

“If I buy a building in D.C., I want to know I'm going to have a buyer to give me liquidity when I want to exit,” Carr Properties Chief Investment Officer Francis Lynch said. “Even if I like D.C., if others don't like D.C., from an investment standpoint, that creates a problem.”

A big reason investors are skeptical they will get the return they’re looking for is the city is suffering from negative rent growth, Smith said. D.C. rents decreased by 2.2% in 2025, after falling by 1.9% in 2024, according to WDCEP’s annual report.

“That's why there's very little development in multifamily and office, other than trophy office,” he said. “Why is rent growth not happening? We haven't had job growth.”

Robinson said for MRP’s apartment portfolio, it was “doom and gloom” as the company entered the second half of last year. That was during a time when the federal government was drastically reducing its staffing. For federal workers who took the administration's deferred resignation offer, their pay ended in September.

“There was no new leases. You were slowly leaking out people as people didn't renew,” Robinson said. “Your occupancy, which was at 93%, 94% slowly worked over the course of six months down to 89%, 88%, and that's where a lot of people were hanging around. And normally, you’re trying to be 94%, 95% leased.”

He said that trajectory started to turn around in the first few months of the year, but there’s still inventory that has to be burned off before real rent growth can take place. 

The environment hasn’t driven equity out of the picture completely. Sales of office buildings in particular have picked up, but the buyer pool is vastly different than the pension funds and global titans that dotted deed records before the pandemic.

“In terms of attracting investors today in D.C., there's really only opportunistic investors,” Carr Properties' Lynch said. “So these are investors looking for really high returns, can take on risk, looking for a short hold period there. There are not nonopportunistic investors active in D.C. right now, and that creates an environment that has a non-well-functioning capital markets ecosystem.”

There are still some projects in the District that are able to nab that key financing component, panelists noted. Those projects are “often starting up on the smaller side,” Clark Construction Capital Group CEO Lee DeLong said.

“So for multifamily, it can be 100, 150, 200 units. I think there's momentum there that will allow that to continue as rent growth goes in the right direction,” he said. “But it's all about equity right now. That's the real tell.”