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Old 04-13-2016, 01:20 PM
 
Location: Washington D.C.
13,672 posts, read 15,533,188 times
Reputation: 4048

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The development slated for completion by 2020 in Washington D.C.'s core neighborhoods such as NOMA, Capital Riverfront, Buzzard Point, The Wharf, Waterfront Station, Union Market, SW Eco District, H Street/Atlas District, Hilleast, Northwest One, Ivy City, McMillian Development, and Mt. Vernon Triangle is really unprecedented across the nation.

Other major developments such as the Old Soldiers Home Redevelopment and Walter Reed Redevelopment will finish in the next decade also. The core of the city will approach full build-out within the next 10-15 years. Capital (money) is beginning to cross into ward 7 and ward 8 by necessity. Below, I have explained how it works:


The real estate market and financing works like this:


Net Operating Income (NOI)

- income generated (rent) from commercial property minus all operating expenses (not including mortgage)

Capitalization Rate (Cap Rate)

- the net operating income (NOI) / price of the property (not mortgage, but actual final sale price)

Property Value

- NOI / Cap Rate



The first step in redevelopment is the increase of the price for housing on residential properties in that sub-market.

The following steps will take place in order over the next 10 years in ward 7 and 8:


1. Increase in price and demand for housing in that sub-market (happening now)

2. Median income and spending power increases in that sub-market (happening now)

3. Investors take notice and begin to acquire property through cash transactions in that sub-market (happening now)

4. Land becomes more expensive because of increased demand from cash transactions from investors, however, banks still won't lend because of high risk.

5. Feasible commercial rent price points begin to rise on commercial properties raising the NOI for properties in that sub-market

6. The risk to banks and investors on lending/investing lowers eventually because of steps 4 and 5

7. Banks begin to finance developers without tax credits for projects in that sub-market because the Cape Rate is higher and the risk is lower.



We are currently on step number 2 and starting to see step 3 of this process. In my next post, I will explain what kind of development is happening in Ward 7 and 8 currently and why it's happening the way it is.
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Old 04-13-2016, 01:36 PM
 
Location: Washington D.C.
13,672 posts, read 15,533,188 times
Reputation: 4048
Quote:
Originally Posted by MDAllstar View Post
The development slated for completion by 2020 in Washington D.C.'s core neighborhoods such as NOMA, Capital Riverfront, Buzzard Point, The Wharf, Waterfront Station, Union Market, SW Eco District, H Street/Atlas District, Hilleast, Northwest One, Ivy City, McMillian Development, and Mt. Vernon Triangle is really unprecedented across the nation.

Other major developments such as the Old Soldiers Home Redevelopment and Walter Reed Redevelopment will finish in the next decade also. The core of the city will approach full build-out within the next 10-15 years. Capital (money) is beginning to cross into ward 7 and ward 8 by necessity. Below, I have explained how it works:


The real estate market and financing works like this:


Net Operating Income (NOI)

- income generated (rent) from commercial property minus all operating expenses (not including mortgage)

Capitalization Rate (Cap Rate)

- the net operating income (NOI) / price of the property (not mortgage, but actual final sale price)

Property Value

- NOI / Cap Rate



The first step in redevelopment is the increase of the price for housing on residential properties in that sub-market.

The following steps will take place in order over the next 10 years in ward 7 and 8:


1. Increase in price and demand for housing in that sub-market (happening now)

2. Median income and spending power increases in that sub-market (happening now)

3. Investors take notice and begin to acquire property through cash transactions in that sub-market (happening now)

4. Land becomes more expensive because of increased demand from cash transactions from investors, however, banks still won't lend because of high risk.

5. Feasible commercial rent price points begin to rise on commercial properties raising the NOI for properties in that sub-market

6. The risk to banks and investors on lending/investing lowers eventually because of steps 4 and 5

7. Banks begin to finance developers without tax credits for projects in that sub-market because the Cape Rate is higher and the risk is lower.



We are currently on step number 2 and starting to see step 3 of this process. In my next post, I will explain what kind of development is happening in Ward 7 and 8 currently and why it's happening the way it is.

Now, having said all of that, what kind of development is currently feasible in ward 7 and ward 8? Tax credit projects and workforce development projects are the only projects that can obtain financing currently. Gap funding is needed for all projects which is provided through low income tax credits and other grants or private funding for lower income units. These are currently the only feasible projects that can obtain financing in ward 7 and ward 8 until the Cap Rate rises which is based on the steps I listed. The risk is way to high to lend money to projects across the river still, but in a few years, that won't be the case.
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Old 04-13-2016, 02:13 PM
 
Location: DC
2,044 posts, read 2,936,796 times
Reputation: 1824
I seriously doubt it will be that soon. It really will require projects west of the river to be built out, especially the major ones. Many of the projects east of the river have lagged for years at this point for this reason alone. The risk is really just to high to justify the expenditure.
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Old 04-13-2016, 02:48 PM
 
Location: Washington D.C.
13,672 posts, read 15,533,188 times
Reputation: 4048
Quote:
Originally Posted by DistrictSonic View Post
I seriously doubt it will be that soon. It really will require projects west of the river to be built out, especially the major ones. Many of the projects east of the river have lagged for years at this point for this reason alone. The risk is really just to high to justify the expenditure.
If you talk to developers about west of the river projects, land has become so expensive because the core is approaching full build-out that capital is going to start to flow even more across the river in the next 5-10 years. It's already flowing now, but more people are buying now which is changing the demographics.

What current projects are you talking? I'm not talking about government projects. If you're referring to Skyland Town Center or St. Elizabeth which are government projects, they play by an entire different set of rules. Even west of the river, those projects sit for years. I'm talking about small to large private projects. Here are some examples:


https://www.washingtonpost.com/local...340_story.html (Busboy's Restaurant Coming to downtown Anacostia 2016)

The 'Anacostia' Building Will Become a Walgreens - Curbed DC (Walgreens Coming to Downtown Anacostia)

https://www.washingtonpost.com/news/...c-s-anacostia/ (1.1 Million sq. Feet of Development coming to Downtown Anacostia)
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Old 04-13-2016, 09:53 PM
 
2,685 posts, read 2,502,755 times
Reputation: 1856
All this makes me wonder how much longer the height limit will last. Once there is no land left to build on and additional space is needed.. the sky becomes the only choice.
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Old 04-14-2016, 06:39 AM
 
Location: It's in the name!
7,068 posts, read 9,471,875 times
Reputation: 3778
Quote:
Originally Posted by MDAllstar View Post
The development slated for completion by 2020 in Washington D.C.'s core neighborhoods such as NOMA, Capital Riverfront, Buzzard Point, The Wharf, Waterfront Station, Union Market, SW Eco District, H Street/Atlas District, Hilleast, Northwest One, Ivy City, McMillian Development, and Mt. Vernon Triangle is really unprecedented across the nation.

Other major developments such as the Old Soldiers Home Redevelopment and Walter Reed Redevelopment will finish in the next decade also. The core of the city will approach full build-out within the next 10-15 years. Capital (money) is beginning to cross into ward 7 and ward 8 by necessity. Below, I have explained how it works:

You forgot about Brentwood Park (Brookland Manor) which is one of the biggest developments in the city.



http://www.bizjournals.com/washingto...ce-one-of.html
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Old 04-14-2016, 07:58 AM
 
Location: Washington D.C.
13,672 posts, read 15,533,188 times
Reputation: 4048
Quote:
Originally Posted by adelphi_sky View Post
You forgot about Brentwood Park (Brookland Manor) which is one of the biggest developments in the city.



http://www.bizjournals.com/washingto...ce-one-of.html
Good catch, I forgot about Brentwood, Edgewood, and Brookland which all have major developments.
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Old 04-14-2016, 08:05 AM
 
Location: Washington D.C.
13,672 posts, read 15,533,188 times
Reputation: 4048
Quote:
Originally Posted by DistrictSonic View Post
I seriously doubt it will be that soon. It really will require projects west of the river to be built out, especially the major ones. Many of the projects east of the river have lagged for years at this point for this reason alone. The risk is really just to high to justify the expenditure.
Many of the projects west of the river will be built-out by 2020. The pace of construction is astronomical in D.C. proper right now. Keep in mind, I said begin to see intense redevelopment meaning plans will start to be submitted. Then over between 2022-2030, build-out of those plans will start to take place. Capital is already moving east of the river now in 2016.

NOMA
https://www.bisnow.com/washington-dc...noma-get-58579

Capital Riverfront
https://www.bisnow.com/washington-dc...rob-ward-58602
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Old 04-14-2016, 09:08 AM
 
Location: West Hollywood, CA from Arlington, VA
2,768 posts, read 3,495,692 times
Reputation: 1575
Quote:
Originally Posted by Chriz Brown View Post
All this makes me wonder how much longer the height limit will last. Once there is no land left to build on and additional space is needed.. the sky becomes the only choice.
Developers will all just flock to Arlington I guess. The fact that the 5 tallest buildings in the DC area will be 1/2 a mile over the DC border (in Rosslyn) by 2017 just speaks volumes to the idiocy of the height limit.
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Old 04-14-2016, 09:31 AM
 
Location: It's in the name!
7,068 posts, read 9,471,875 times
Reputation: 3778
Quote:
Originally Posted by MDAllstar View Post
Many of the projects west of the river will be built-out by 2020. The pace of construction is astronomical in D.C. proper right now. Keep in mind, I said begin to see intense redevelopment meaning plans will start to be submitted. Then over between 2022-2030, build-out of those plans will start to take place. Capital is already moving east of the river now in 2016.

NOMA
https://www.bisnow.com/washington-dc...noma-get-58579

Capital Riverfront
https://www.bisnow.com/washington-dc...rob-ward-58602
People don't realize that as crime continues to decrease, it doesn't matter where development occurs. Gentrification specifically seeks out low-to-mid income areas. These areas are prevalent east of the river. It's almost like the laws of physics. All that racial redlining stuff is in the past. Like I said, you have a generation now that doesn't mind living in diverse neighborhoods. Developers understand this. Or they soon will.

Therefore neighborhoods east of the river are looking more and more attractive to developers. Especially because of the cheap land costs. If it can happen to Columbia Heights, U Street, 14th Street and an empty warehouse district in Ivy City, then what would stop more developers from coming in?

All it takes is one developer and one successful project. And then the flood gates open. There is a TON of potential east of the river specifically because it has been neglected for so long. Tons of square feet and acreage in transit districts that can sustain 15 years of redevelopment or more. .
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