After months of little to no activity, multifamily development in the nation’s capital is seeing the beginnings of a quiet resurgence.
Hoping to lead the way: Chicago-based real estate investment firm Pritzker Realty Group and Greenbelt, Md.-based developer and manager The Bozzuto Group. Earlier this week, the firms announced the creation of a joint venture with an initial capital commitment of $75 million to seek multifamily development and acquisition opportunities in high-growth locations throughout the Mid-Atlantic and Northeast regions, with a specific focus on the greater Washington-Baltimore metropolitan area.
“In the development business, you’re always looking around the corner for what’s going to happen, not what’s currently happening,” says Toby Bozzuto, president of The Bozzuto Group.
This is the motivating factor behind Bozzuto’s partnership with Pritzker. “Washington, D.C., will be the recipient of a lot of job growth and that, combined with a supply imbalance, leads to a perfect storm of demand,” Bozzuto explains. “We both felt now was a good time to find new deals and deliver a great product to the 2012 to 2015 market.”
Bozzuto and Pritzker aren’t the only firms banking on the D.C. market. Last week, Englewood, Colo.-based Archstone broke ground on its latest apartment project, the 469-unit Class A Archstone NoMa in D.C.’s up-and-coming NoMa neighborhood in downtown D.C. Nearby, other developers have broken ground on two mixed-use communities: Constitution Square and Loree Grand at Union Place.
The Department of Justice and NPR also have plans to move their offices to the area. “There’s lots of commercial interest,” says Grant Montgomery, director of apartment practice at Alexandria, Va.-based market research firm Delta Associates. “It’s a lower-cost government office location and good for other businesses that can’t afford downtown rents.”
Montgomery names the city’s Columbia Pike Corridor as another emerging neighborhood, with four new Class A apartment projects in the works. “It’s getting much more urban,” he says.
Valerie Santos, D.C. deputy mayor for planning and economic development, stressed in her groundbreaking ceremony remarks that D.C.’s development goals include bringing more tenants into the city and supporting transit-oriented and sustainable development.
In the past two quarters (ending June 2010), 6,161 Class A apartments have come online with an additional 3,980 units projected to deliver within the next 12 months (ending June 2011), according to Delta Associates. “We definitely believe that the market is coming back to life,” Montgomery says.
Bozzuto predicts that the greatest amount of new development will be transit oriented, citing the areas surrounding Metro’s red line as a golden opportunity.
“The red line goes through so many great neighborhoods, and amenities are so rich. It’s a great place for young people,” Bozzuto says. “A lot of our future clients are Gen Y renters—people who may be currently living in their parents’ basement but are going to get jobs and would rather rent a smaller unit but in a highly-amenitized building in a great location.”
Montgomery echoes Bozzuto’s faith in the D.C. multifamily market as a whole, even if development takes a while to return to previous levels.
“Washington, D.C., is one of the strongest residential apartment markets in the country,” he says, citing the continual cycle of government, contractors, and consulting firms. “There is a steady stream of affluent renters by choice, which plays into the quality and type of rental units available.”