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The 10 Biggest DC Real Estate Stories Of 2016

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In a year highlighted by a heated election season, 2016 was a noteworthy one for DC commercial real estate. From the merger of two of DC's biggest developers to the unprecedented pace of multifamily deliveries to the growth of co-working, the year saw several big deals signed and many trends emerge, so we ranked the top 10 stories. 

10. Walmart Backs Out Of Two DC Developments

Rendering of Skyland Town Center in Ward 7
A rendering of Skyland Town Center

Two major mixed-use projects east of the Anacostia, Skyland Town Center and Capitol Gateway, went into this year planning to be anchored by Walmart. But the retail giant backed out of the two projects as part of the company's larger decision to close 154 stores. 

Gary Rappaport and Chris Smith pushed forward with Skyland, the $256M Ward 7 project (above), despite losing its anchor tenant. In September the partnership received some good news when The District agreed to an $18.8M financing package to help break ground on the project. 

9. The Wharf Lands Major Office Tenants, Tops Out Construction

The Wharf construction
The Wharf's Phase 1 construction, taken at an event in November

As Hoffman-Madison Watefront's transformative The Wharf project continues construction on the Southwest Waterfront, the owners signed some major office tenants this year. After landing the American Psychiatric Association to anchor The Wharf's 800 Maine in 2015, the building brought in lobbying shop Van Scoyoc Associates for 21k SF in May and co-working company MakeOffices signed on in June to open a 45k SF space on the second and third floors. 

Most recently, and most significantly, Fish & Richardson signed on for 60k SF at trophy office 1000 Maine Ave, becoming the first law firm to make the move to The Wharf. 

As it prepares to open next October, The Wharf topped out its first four buildings last month. 

8. National Emergence Of DC's Restaurant Scene

Bidwell Union Market

As popular chefs continue to raise the prominence of DC's dining scene, the city's burgeoning restaurant industry was put in the national spotlight this year. 

Twelve DC restaurants were awarded Michelin stars in October when the District's version of the prestigious dining guide was released. Another 19 were named to the Bib Gourmand list for top affordable restaurants, including Union Market's Bidwell, above. 

As the slate of restaurants chosen for the Michelin Guide shows, DC's dining scene continues to shift to the east with popular spots opening up in neighborhoods like the East End, Union Market and H Street. 

With roughly 250 restaurant tenants actively on the market and plenty of available spaces to open restaurants, DC's dining boom is poised to continue next year. 

7. Multifamily Deliveries Set Record Pace

The Apollo
The Apollo

The District set a record for multifamily deliveries in 2016 with more than 6,500 new units now on the market. Two big apartment buildings delivered on H Street NE in Q4: Insight Property Group's 431-unit The Apollo (above) and Jair Lynch's 307-unit Anthology. The NoMa and Capitol Riverfront neighborhoods continue to drive the District's multifamily growth.

This pace is poised to continue through 2017, which is expected to surpass this year's record mark for deliveries. Big projects like The Wharf and Art Place at Fort Totten will bring more than 500 units each next year. 

With a surging multifamily pipeline, construction lenders have begun to hesitate more about financing new construction, a sign that supply could soon return to normal levels. 

6. Landlords Still Waiting For An Office Comeback

1812 North Moore Rosslyn

DC's office leasing market continued to sputter along in 2016, with uncertainty leading up to the election softening the market for much of the year. Predictions of an office market rebound in 2016 seem to have been exaggerated, but developers remain optimistic about next year's prospects.  

Office vacancy remains above 20% in NoVa, where buildings like Monday Properties' 1812 North Moore, above, still sit empty. The election results have Arlington landlords feeling good though, with many already noticing a pickup in activity since Nov. 8. 

In the urban core, repositioned office buildings have performed better than newly constructed buildings, a recent report showed.

5. The Death Spiral Of Metro

Wiehle Reston East Station

The Metro continues to drive development in DC, with much of the area's mixed-use development being built steps from a station. Phase 2 of the Silver Line in NoVa, which currently ends at the Wiehle-Reston East Station (above), has sparked a ton of new development; ditto the new Alexandria station at Potomac Yard. 

But despite the boom the public transit system has spurred in the real estate industry, Metro has had a terrible year full of accidents, closures, service reductions and firings. A number of safety incidents led to the Safetrack maintenance program, which has forced stretches of the system to close down for weeks at a time. With the system still not fixed, WMATA is cutting back late-night hours for two years starting July 2017, upsetting workers and public officials alike. 

Amid a year of bad headlines, the Metro has also experienced falling ridership. Top developers and brokers remain confident that WMATA will fix its problems and believe the transit system is still a reliable anchor for future development.  

4. Booming Co-Working Sector Drives Office Demand

WeWork Met Square
The entrance of WeWork's White House location, its largest in D.C.

The region's office demand has been driven largely by the exploding co-working sector. Co-working companies have signed nearly 500k SF of combined leases in 2016, amounting to nearly 40% of the year's positive net absorption. 

This growth, highlighted by WeWork's recent opening of the 120k SF Met Square location, above, has put DC behind only New York for the top co-working markets in the US. Both WeWork and DC-based MakeOffices have opened co-working spaces in the heart of the CBD, a sign that they are expanding beyond their traditional tenant base of tech startups.

Industry leaders and researchers agree that DC's co-working sector will continue its rapid pace of growth next year as more companies learn the advantages of the flexible office space concept, but it will likely be a smaller piece of the pie as other office sectors regain strength following the election. 

3. Marriott Merges With Starwood, To Keep HQ In Bethesda

Marriott founder Bill Marriott
Marriott founder and Executive Chairman Bill Marriott at a 2015 Bisnow event

The $13.6B merger between Bethesda-based Marriott International and Starwood hotels earned regulatory approval in September. Hotel industry leaders and experts have expressed confidence in the company's ability to combine the two industry giants, but they think the merger will send shockwaves throughout the industry. 

Marriott also announced it has narrowed its search for a new $600M HQ facility to Downtown Bethesda, with local incentives helping it stay in Montgomery County. The region's largest private office tenant on the market has yet to decide on a specific site, but based on its search requirements, four downtown Bethesda properties appear to be in contention.

2. JBG Merges With Vornado/Charles E. Smith In $8.4B Deal

JBG Smith Matt Kelly
JBG Smith CEO Matt Kelly

DC's largest real estate developer is about to get a whole lot bigger. After its proposed merger with New York REIT fell through this summer, The JBG Cos inked a similar deal with Vornado. The Chevy Chase-based developer will merge with Vornado's DC arm to form an $8.4B public company, JBG Smith

The new company will own major assets in every DC submarket, including 50 office properties totaling 11.8M SF, 18 multifamily properties totaling 4,451 units, 700k SF of additional properties and a future development pipeline of nearly 20M SF. 

JBG managing principal Matt Kelly, above, will become the CEO of JBG Smith while Vornado's Mitchell Schear will be a member of the company's board. Kelly plans to use JBG's placemaking expertise to turn Crystal City, where Vornado owns a majority of the real estate, into a "vibrant mixed-use community." 

1. Trump Opens Old Post Office Hotel During Heated Presidential Campaign

Old Post office Trump hotel DC
The Trump International Hotel at the Old Post Office building

The man who will lead any list of top 2016 news stories, President-elect Donald Trump, would have made DC real estate news without his historic election upset. In September, he took a break from the campaign trail to open his new luxury hotel in the Old Post Office building on Pennsylvania Avenue. 

His election will have a significant impact on the national commercial real estate industry and the DC market alike, with many locals expecting a bump in office leasing as a result of his campaign policy proposals and party alignment in the executive and legislative branches.

As he prepares to parade down Pennsylvania Avenue and take the oath of office next month, his hotel on the parade route highlights a new series of conflicts of interest the billionaire future commander-in-chief faces. His Old Post Office building lease with the GSA, for example, will be breached as soon as he takes office unless he divests from his businesses.