‘All-In On Downtown’: Officials Push To Reinvent D.C.'s Downtrodden Core
As the pandemic-induced lack of activity in Downtown Washington, D.C., approaches its two-year anniversary, it would seem a strange time for a local restaurateur to open a new type of concept in the heart of the central business district.
But Anna Valero, whose company is opening up a 2,200 SF restaurant pavilion called The Springs at Franklin Park later this year, is undeterred.
“We’re going all-in on downtown,” said Valero, the president and co-founder of Pirate Ventures, the operator of the Franklin Park concept. “I think the question I hear the most when speaking about the projects that we’re doing downtown is the question of: ‘Oh, so you think events are going to come back?’ And I do.”
Valero is betting on downtown returning to prominence, but Mayor Muriel Bowser's administration is taking more direct action this year to help ensure gambles like The Springs pay off. A large part of that focus is being directed at reducing the area's oversaturation of office buildings.
Millions of square feet of office have been delivered in downtown submarkets since 2018, and even before the pandemic, more tenants were shrinking than expanding. Absorption turned negative in the East End in 2018, then in the CBD in 2019, according to data prepared for the Washington, D.C., Economic Partnership by Cushman & Wakefield.
The pandemic slammed the brakes on leases in downtown, but Deputy Mayor John Falcicchio said the writing has been on the wall for years: Big office tenants are looking to markets with thousands of new apartments like NoMa and the Wharf.
“This actually goes back, probably more than a decade,” Falcicchio told Bisnow. “When you see where companies are locating, they're doing it in neighborhoods that feel a little bit different in terms of their mix of uses. And so that gives us a chance to kind of re-evaluate what happened downtown.”
To bring the market up-to-date in a world with increased remote work, Falcicchio said downtown will need an infusion of residential, retail and events to get feet on pavement.
Change is already coming: In the past two months, three new office-to-residential projects have been announced, which may be the first salvo in a wave of development that could bring down downtown D.C.’s sky-high office vacancy from roughly 19% to its historical average of 13.4%.
Gary Cohen, chairman and executive vice president of Willco, is planning one such conversion at 1111 20th St. NW. The developer said the time is right in downtown and the Golden Triangle BID area — where his building, the former Peace Corps headquarters, is located — for more multifamily development.
“There’s a reason why [office owners] are converting to multifamily and not waiting for the office market to come back,” Cohen said. “They could be waiting a very long time.”
To bolster these efforts, public and private entities are investing millions in streetscapes and new event spaces, betting on a return of tourism and an influx of new residential buildings to shake the CBD out of the doldrums.
D.C. has announced or invested in a suite of programs to aid downtown’s recovery. Last year, Bowser allocated $5M for Destination D.C. to boost its marketing efforts and encourage visitors back to the city. The mayor also budgeted $8M for three BIDs to “support catalytic placemaking and recovery projects.”
And on Jan. 31, the Office of Planning unveiled $2.8M in grants through the Streets for People Initiative, which went to several business improvement districts like Golden Triangle BID and DowntownDC BID to assist with streetscape improvements, streateries and direct support to retailers trying to eke out a business in the struggling markets.
“We understand how much opportunity to fill vacancy there's been downtown,” Office of Planning interim Director Anita Cozart told Bisnow. “We feel like these investments and bringing activations, bringing dining, bringing events, bringing spaces to play and gather safely downtown are important for, you know, really attracting people back.”
In some cases, BIDs are offering direct assistance to businesses looking for retail space. The Golden Triangle BID began its Grow Golden program last year to provide technical assistance and a few months of free rent to emerging businesses and entrepreneurs who want to try out a retail location within the BID’s borders.
The program, which accepts applicants on a rolling basis, has identified space for an arts and fashion pop-up, a beauty boutique, and other businesses on the ground floors of large office buildings, Golden Triangle BID Executive Director Leona Agouridis said.
Landlords have been enthusiastic about the program, signing some of its original enrollees like the DC Pop-Up by Shea Yeleen to lease extensions after they made it through to the end of their initial Grow Golden lease terms.
“I think that’s the best feedback honestly, is that they keep renewing,” Agouridis said.
Events DC, the city’s quasi-public agency tasked with running sports venues and convention centers, is also thinking creatively about reviving its downtown spaces.
Projections from Destination D.C., the city’s marketing and tourism agency, show that D.C. had about 16 million domestic visitors in 2021, and will have about 20 million in 2022. That’s a sizable uptick, but still 87% of pre-pandemic visitor numbers.
After seeing a precipitous fall in events at the Walter E. Washington Convention Center — operating revenues dropped 26% in 2021 compared to the year before — Events DC President and CEO Greg O’Dell said the organization has “a pretty strong book of business” this year, with relatively few cancellations.
He said he’s confident that the city’s reputation as a place that takes Covid protocols seriously will entice further business as the city exits the latest pandemic surge.
“It’s like night and day,” O’Dell said. “It was specifically the shutdowns that limited operations for indoor venues and the like, and we saw the brunt of that in 2021. And so this year obviously looks much better in comparison.”
The agency is also thinking creatively about ways to revive the downtown streetscape. O’Dell said construction is wrapping up on four street-facing retail kiosks at the convention center, which will help activate the facade on Ninth Street. A new rooftop terrace on the convention center’s north side is also under construction, and O'Dell said three more kiosks on the convention center's south end are under consideration.
“What's cool about it, is that these kiosks were kind of created literally out of thin air … they're actually hanging above our concourse in our building,” O’Dell said. “It's something we've wanted to do for a while.”
Beyond the Convention Center, O’Dell is mulling opportunities to activate spaces downtown that haven’t seen as many events, including Pennsylvania Avenue. Without the local government's help, there is ongoing concern over the health of the existing businesses that rely on high levels of foot traffic.
“The onus will be on us to help drive more experiences to have people come downtown,” O’Dell said. “We need to leverage not only our venues but also our public spaces.”
All of this investment in retail could be a win for office owners, said Evan Behr, co-lead of JLL’s D.C. agency leasing team. He said the combination of office-to-residential conversions and a renewed focus on supporting retailers will help right-size and reinvigorate the office market.
“You look at a vibrant submarket like The Yards or The Wharf, and the proof is sort of in the pudding,” Behr said. “Having an 18-hour-day environment helps and is attractive for all sorts of organizations, and so when you think about the downtown core and having the retail interact with the office, I think it’s a great investment.”
Of course, office-to-residential conversions are notoriously difficult in the downtown space. Falcicchio noted that in addition to difficulties with layout, some conversions struggle to make the switch from complying with office fire codes to residential fire codes.
Emily Anderer, director of research and market strategy at Dochter & Alexander, said that prognosticators have been predicting the rise of these projects since the pandemic began, but only in the last two months did a cluster begin to appear.
“This is only three conversions that will bring, I don't know, a couple hundred people each to the surrounding areas,” Anderer said. “So it will help, but it's not a big solution to any structural issues that might be there.”
Still, Anderer is long on the future of retail in downtown. She noted that the opening of golf concepts the Puttery and Swingers will bring more experiential retail tenants to downtown areas, in addition to splashy concepts like the esports arena opening next to Capital One Arena.
Anderer said anecdotally, most of the people she knows who work in the federal government anticipate a hybrid schedule when the federal workforce is eventually called back into offices, cutting down on the regular lunchtime and happy hour customers who keep downtown retailers and restaurants afloat.
She anticipates that shift in office workers will be “a very big change” for the region, and said investments in streetscape improvements, public spaces and entertainment options will be pivotal to keep people coming to downtown.
“There are a lot of museums, sports stadia, there are a lot of things to bring people to downtown already,” Anderer said. “If hybrid and permanently remote work schedules are embraced long-term, then I anticipate we're going to see a lot of creative thinking about how to increase those other components of foot traffic and visitors and just bringing people back to the East End and to the CBD.”