A visit to Washington, D.C. will reveal one obvious fact to any visitor upon first impression—especially to those driving in from New York Avenue in the Northeast.
The skyline is littered with cranes. It is alive and growing every day. And much of this activity is thanks to the aggressive growth of multifamily developments, so much so that the word “overdevelopment” is beginning to circulate around among owners in the city.
After a recent visit to D.C., Ryan Severino, senior economist for New York City-based Reis, posted the following tweet:
“Just got back from touring Washington, D.C. Lots of concern about new apartment supply hitting the market in 2013 and 2014. Pipeline is starting to swell all over the metro area.”
He’s right. Land is scarce and competition is rabid in the tiny, yet bustling city. But while there may be a height limit on buildings in D.C., developers like Jefferson Apartment Group (JAG) still think the sky’s the limit in Washington.
“We believe the supply bubble here will drop pretty quickly, there’s not a lot of entitlement right now” says Greg Lamb, executive vice president and partner for JAG. “We like the long-term picture and we’re trying to get back to our long-term financing strategy. Right now, we’re just dealing with pentup demand.”
A few years ago, all of JAG's D.C.-based development activity came to a screeching halt. And this region was its bread and butter. But now they are back in full swing in the District and have six projects underway in the metro area. Their story exemplifies a larger trend going on in booming metros across the country. Core markets for many companies are getting too crowded. So once they stretch their arms as far as they can there, they have the flexibility to expand to new regions.
In JAG's case, this meant an opportunity for branching into new corridors up and down the east coast. The company currently has offices as far north as Boston, Mass. and as far south as Orlando, Fla. While Boston has been more challenging, with its high barrier to entry, Florida has proven to be a wise gamble in the distressed arena, and the company has five developments in the works there.
“We were able to come in earlier and acquire land at below-market prices,” says Lamb. “Because we did this some time ago, in these markets we will be the first to deliver and we’ll really benefit from the timing.”
The company’s projects in Tampa, West Palm Beach, Ft. Lauderdale, Pompano Beach, and Orlando are all set to deliver in 2013 and 2014. But that doesn’t mean they have taken their eyes off of their core market.
“Our 2013 pipeline is pretty well set. So now we’ll be looking to buy below market cost deals in the core markets were already in," says Lamb. "We’re already looking for 2014 starts on our home turf.”