America's Property Tax Advisor

Some Washington D.C. Real Estate Recovers

BY TOM BRANHAM, WASHINGTON D.C., FEBRUARY 2022

Industry experts are generally optimistic about the Washington D.C. real estate market in 2022, especially the second half of the year. Hospitality and office properties have yet to fully recover. However, warehouses, apartments and retail stores are projected to have solid performances, according to Axios Washington D.C.

 

Hotels

 

The COVID pandemic hurt hotel properties more than any other segment of the real estate market. Three months into the pandemic, the hotel industry recorded the following:

 

 

Occupancy (-51.7%)

 

Average Daily Rate (-39.9%)

 

Revenue Per Available Room (-71.0%)

 

Though the hospitality industry improved modestly in 2021, it was still stifled due to the Delta and Omicron variants.

 

With health and safety concerns in regard to business and leisure travel, the industry is nowhere near pre-pandemic levels and is not expected to be for several years. Analysts believe D.C.’s hospitality market may never achieve the same performance levels reported in 2018/2019.

 

Offices

 

Office vacancies in the District were a problem even before the pandemic. The vacancy rate hit a record high of 18.4% at the end of 2021. It’s expected to remain high for the near future.

 

Buildings that were tough to lease before the pandemic have remained empty, while trophy buildings are doing well, according to CBRE Mid-Atlantic Director of Research Wei Xie. The success of trophy buildings highlights the increased importance that employers are placing on providing spaces that people enjoy working in.

 

Job growth is expected to increase in the District this year, which could improve the office vacancy rate.

 

Warehouses

 

The pandemic-induced e-commerce boom has been good for the industrial warehouse market, CBRE Senior Director of Research and Analysis Ian Anderson told Axios.

 

Over the next 18 months, the D.C. region is projected to build another 6.3 million square feet of industrial warehouses. That’s enough warehouses to fill the National Mall.

 

Apartments

 

A lack of multi-family housing is fueling the nationwide affordability crisis, Anderson added. The D.C. region will build and deliver more apartment units in 2022 than in the last 25 to 30 years. And it still won’t be enough.

 

Vacancy rates in this market are low, as multi-family renters continue to return to the District.

 

Retail

 

Retail stores are benefiting from multi-family housing’s success. But the winter COVID surge may delay progress in retail until the second half of the year.

 

The Impact on Property Taxes

 

As D.C.’s real estate markets recover at varying rates, there will be ad valorem tax implications for individual properties. Even when markets improve, it won’t be a one-size-fits-all situation.

 

Challenges with increased vacancies, distressed rents, and inequities among competing properties must be addressed. Otherwise, properties will be left over assessed and owners will pay more than their fair share of taxes.