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Developers Rejoice Over Regional Funding Commitment For Metro

D.C., Maryland and Virginia in recent weeks have each committed to put forward their share of $500M in annual funding for Metro, paving the way for the transit system's first dedicated revenue stream since it opened in 1976. 

The Gallery Place Metro station

Several of the region's top developers, who have come to rely on the system as an anchor for mixed-use projects, say this is an important step in supporting the region's growth and could make D.C. more attractive for Amazon's second headquarters. 

WMATA General Manager Paul Wiedefeld first called for $500M in dedicated annual funding in April, saying it would help pay for a 10-year investment program totaling $15.5B that would allow for improvements such as buying new rail cars, upgrading tracks and modernizing stations. 

Maryland leaders said Thursday the state would provide $167M in annual funding, the portion a cost-sharing formula calls for it to contribute, after Virginia earlier this month committed to its $154M share and D.C. promised to contribute $178M per year. 

"It's phenomenal that people really have stepped up to being regional in focus, and realizing that we have regional issues, and Metro is the one no one had been willing to address until this spring," said Bob Buchanan, developer and president of the 2030 Group. "It has been a huge transformation of how we've done business here in the greater Washington area." 

StonebridgeCarras principal Doug Firstenberg with MRP Realty founding principal Fred Rothmeijer

StonebridgeCarras principal Doug Firstenberg said he was surprised to see the urgency with which the three jurisdictions came together over the last year. 

"It's a fantastic outcome for the region," Firstenberg said. "I don't think until recently people understood the gravity of what Metro needed and what it would take to get Metro funded until the last 12 months, which is why things got done." 

Firstenberg, whose firm has built major Metro-adjacent developments — such as NoMa's Constitution Square — and is working on transit-oriented projects in Bethesda and Alexandria, said the success of these developments depends on the stability of the Metro system. 

Of the 52.6M SF of commercial development under construction in the Washington Metro region, 60% is within a half mile of a Metro stop, according to Newmark Knight Frank. 

"Our business model is completely Metro-centric, so for us this was hugely important that where we have made our investments, and will likely continue to make investments, are going to have a strong Metro system supporting them," Firstenberg said.

Akridge founder Chip Akridge

Major safety failures have dogged Metro in recent years, such as a 2009 crash at Fort Totten that killed nine and a 2015 smoke incident at L'Enfant Plaza that killed one person. The transit system has forced riders to plan around weeks-long closures and frequent delays caused by maintenance needs and other issues. These struggles have caused ridership to drop or stagnate in recent years, even as the District's population grows and more housing and offices are built near Metro. 

"The concern you have to have is the reliability of the system," said Foulger-Pratt Chairman Bryant Foulger, whose firm is working on Metro-adjacent projects in NoMa and Tysons. "Most of the development in the last 10 years has occurred around Metro, yet we've seen a decline in Metro ridership over the last 10 years. The biggest complaints you hear are reliability." 

As people choose to forgo riding Metro, traffic worsens along the city's streets and getting around becomes more difficult. This can frustrate those who work and live in the region and negatively impact the city's real estate, Akridge CEO Chip Akridge said.

"Without Metro we have gridlock, and that doesn't work," said Akridge, who is working on multiple Downtown D.C. developments and planning the future Burnham Place megaproject atop the Union Station railyard. "People won't put up with it and they'll leave. That's not an option here, it has to work." 

Madison Apartment Group's Greg Church, WC Smith CEO Chris Smith and EagleBank's Tony Marquez

With dedicated funding in place, Metro should be able to improve the predictability of its service and win back more riders, WC Smith CEO Chris Smith said. 

"It's not going to happen overnight, but with a permanent funding stream, they can now plan and do things that will take three or four years," Smith said. "You couldn't plan a four-year project if you didn't know you had the income stream to finance it, so everything they were doing was short term and all came crumbling down on them in the last two years." 

But Buchanan stressed there are still issues that need to be resolved around Metro, such as reforming the system's governing structure and ensuring the money is budgeted wisely. 

"We got the funding dedicated and have a sufficient amount, now we need to take the next steps on what is the long-term thinking and planning," Buchanan said. "Now that we've got funding we can focus on governance."

The cross-border agreement to fund Metro not only promises to improve the transit system, it sends a strong signal to investors and lenders that the region's future is stable and worth betting on, EagleBank Chief Real Estate Lending Officer Tony Marquez said.

"We've all been looking for evidence of regional cooperation relative to funding of Metro, and it now appears we have evidence of that," Marquez said. "That helps send a positive message to investors in the entire region." 

The regional cooperation can help the D.C. area lure major companies, creating jobs and improving its office market, developers said. Being near Metro has proved to be a significant advantage in D.C.'s office market. Metro-accessible buildings command a 34% rent premium and have a vacancy rate nearly six percentage points lower than non-Metro-accessible buildings, JLL's Q4 office report found. 

"I think it continues to show the progress Washington has been making as a place to relocate for a variety of types of businesses," Firstenberg said. "The committment to fund this type of infrastructure sends a very clear message that this is what we're going to do. Not funding Metro would have been a huge negative issue." 

Foulger-Pratt Chairman Bryant Foulger

The largest of those companies is Amazon, which placed all three of the D.C.-area jurisdictions on its 20-city shortlist for its $5B second headquarters in January. Smith said he thinks the competition played a part in the region's urgency to come to a funding solution for Metro. 

"It certainly helped that the three jurisdictions realized that in order to attract something like Amazon, they have to show that as a region the three jurisdictions can cooperate, and there's probably no better example of that today than the Metro funding," Smith said. "I think it's a huge feather in our cap we can show that the three jurisdictions came together." 

Foulger, who had previously told Bisnow he worried Metro's struggles could disadvantage the region in the Amazon HQ2 competition, said this progress should prove to be a valuable element in attracting the tech giant. 

"Based on [Amazon's] criteria, transit is important," Foulger said. "I think it's safe to say prior to the three jurisdictions stepping up, there had been an unanswered question about what's the future of Metro, and this goes a long way to answer that question."