More than three years after leaving the nation’s capital, Trammell Crow Residential (TCR) is back again.
Earlier this month, the resurgent development giant announced plans to open a new regional office in Washington, D.C., to serve the mid-Atlantic region, which includes Virginia, Maryland and Washington, D.C.
In some respects, the timing seems curious. There are 40,000 units in the three-year pipeline for the nation’s capital and the vacancy rate in Class A apartments has jumped from 3.9 percent to 4.6 percent, according to Alexandria, Va.,-based research firm Delta Associates.
Leonard Wood, Jr., a senior managing director with the firm, acknowledges that it isn’t an ideal time to go into D.C.
“A lot of people would argue that it’s a time in the cycle where you should be putting on the brakes,” he says. “But long-term we view it as a well-thought out move. By 2015 and 2016, we’ll get back to normal job growth in the Mid Atlantic.”
But on the other side of the equation, absorption has been robust. Rent for Class A units has jumped from $1,872 to $1,914 in the past years and vacancy at Class A and B assets has held at 4.1 percent over the past year.
“In the Washington, D.C., market, over the past year or so, we’ve noticed a record amount of absorption of class A and B apartments, which has helped absorb a lot of the supply that’s also being built in the area,” says William Rich, senior vice president and multifamily practice director at Delta. “The amount of absorption of apartments is remarkable, despite the less than robust job growth that Washington has experienced over the last year or two. We attribute the increase largely due to Millennials coming into the market. While there hasn’t been a lot of net new jobs, there has been a lot of jobs that people moving into metro area are taking from those that are retiring.”
TCR, a company that has built more than 230,000 multifamily units since 1977, isn’t alone in its interest in D.C. Rich says that Boston-based Winn Development, Los Angeles-based Fore Property Company, and New York-based The Related Cos., have recently entered the market.
A Big Pipeline
TCR added Robert Brooks, formerly senior vice president and partner at Jefferson Apartment Group (JAG), to provide on-the-ground leadership of the new mid-Atlantic operations. At JAG, Brooks led the development team covering Washington, D.C., Maryland and Virginia, which included identifying and overseeing new multifamily, mixed-use and land development opportunities, as well as sourcing and presenting new investment opportunities.
Brooks will report to Wood, Jr., who currently leads TCR's Southeast practice from Atlanta. Wood’s Southeastern group, which includes Northern Florida, Georgia, Florida, and the Carolinas, has 1,300 units in the pipeline.
“The real focus has been on Atlanta in the Southeast and now the Mid Atlantic,” Wood says. “The thought was starting in Atlanta. We got that office going and now we’re expanding.”
TCR restarted its construction engine in 2012, after most of its development team left when former CEO Charlie Brindell spun Mill Creek Residential Trust out from the company in 2010. The team, led by CEO Ken Valach, had to work through a number of legacy issues with its pre-2008 deals. After establishing a foothold in Dallas and Houston, it moved into Denver and the West Coast (in addition to the Southeast) as the company’s lending and equity partners came back into the fold. Now, it has an ambitious 9,000 units in the pipeline.
“That [the return of these partners] has been a wonderful catalyst that allowed us to get back into business quickly,” Wood, Jr. says.