It’s easy to make sweeping generalizations when you’re in the middle of a pronounced trend, but less so when you’re moving in fits & starts.  Like highway driving in the DC area, it should only take about 20 minutes to travel from Tyson’s Corner to Downtown DC, but other than during the wee hours of the morning traffic stops or slows for no obvious reason.  Frequently local travel time is subject to randomness beyond prediction. Sometimes traffic clears up almost immediately.  Other times it moves in fits and starts all the way to your destination.  Sadly, our local market has been performing with the efficiency of our road system.  It’s smooth sailing in some places and a parking lot in others.  For example, large blocks (over 50,000 sq. ft.) of new, trophy-quality space are few and far between, while deals abound for mid-size (10,000 – 30,000 sq. ft.) space in Class A buildings, and good quality small suites (<3,000 sq. ft.) are scarce.

In spite of the stop and go conditions, it remains a wonderful time to be a tenant in the market.  Across the board concessions are up and effective rental costs and construction pricing are down.  The current “sweet spot” for tenants is for Class A space in Downtown DC.  The hottest submarket at the moment is the R-B Corridor (Rosslyn, Courthouse, Clarendon and Ballston).  Incredibly, existing Class A buildings in the RB Corridor can be almost as costly as NEW Class A buildings in Downtown DC.

Rental rates are creeping up, but so are concessions.  We’re frequently seeing concession packages total approximately 20-30% of base rental for new Class A space in Downtown DC. For example, we recently negotiated with several new Class A properties willing to offer five year leases with 6 months of free rent plus improvement allowances greater than a year’s rent.  Concessions for renewals are typically much lower.

As predicted, vacancy rates peaked in the first quarter at 13.5% and have slowly started to subside (decreasing 0.2% to 13.3%). Absorption  was positive for the third consecutive quarter and totaled 1,097,659 sq. ft.  That said, the overall vacancy rate in Downtown DC increased to 11.8% and total sublease space downtown increased by approximately 100,000 sq. ft.  At the same time Downtown DC posted over 600,000 sq. ft. of positive absorption.  Simply put, demand was strong but was outpaced by supply.  Six new buildings (totaling over 1.1 million sq. ft.) delivered to the market last quarter.  Another 3.7 million sq. ft. of new space is under construction, but much of that space is spoken for  (note that a year ago over 10 million sq. ft. was in the pipeline).

As a tenant representation organization, we love seeing these conditions in the market.  It presents an ideal time to capitalize on the market’s weakness and strike better deals for our clients. How long will the good times last?  We believe that the sweet spot for concessions will occur through at least the end of 2010.  Landlord confidence (and rates) will probably pick up at the end of the year.  Unfortunately, once the wave of buildings currently under construction has been delivered, nothing new will be built for a while.  There may be the occasional pre-leased building, but speculative development will be taking a holiday for the foreseeable future.  It’s too early to speculate about how tight the market may become a few years from now, but we believe that Downtown DC and suburban markets inside the Beltway will return to a 6-8% vacancy rate before the end of 2012.
One interesting phenomenon of the financial crisis remains the upside-down cost of owning vs. leasing.  Traditionally, leasing has been the least expensive method of occupying office space.  Now that the cost of borrowing is around 6% – 6.5% and sale prices are flat, so the cost of owning is frequently less expensive than leasing office space.  Owning isn’t the right decision for every organization.  However, if your organization is relatively stable in size and is able to pull together the equity required for a purchase, you may want to include purchase opportunities in your mix of options.

But What Does It Mean?

• The Vacancy Rate peaked 1Q2010 and has started to subside.
• Only 3.7 million sq. ft. of new office supply still under construction and no new office building starts are planned for the foreseeable future.
• Great deals were seen in the first half of 2010 and “aggressive” deals should be available for at least the remainder of the year.
• Low interest rates and depressed sales prices have made the cost of owning lower than renting in many submarkets.
• “Face” rates are increasing while effective rental rates drop. Concessions may total up to 30% of the lease value.
• Construction costs remain low resulting in the return of “turnkey” build outs.

by Jeff Clabaugh Staff Reporter
Washington Business Journal
Tuesday, December 1, 2009

Average office rents worldwide declined 7.7 percent in the fiscal year ending in September, according to the report, with rents down in 131 of the 179 major cities CB Richard Ellis tracks. Nearly 50 markets have seen double-digit declines, with rents in Kiev falling 64.6 percent in the last year, and rents in Singapore dropping 53.4 percent, the biggest declines globally.

Other large drops include a 41 percent decline in Hong Kong, a 39 percent decline in Abu Dhabi and a 35 percent decline in Moscow.

Boston and New York are both among the 10 largest declines, with Boston rents down 33.9 percent, rents in downtown New York down 30.2 percent and rents in Midtown New York down 29.7 percent.

By contrast, the report says rents in Washington’s central business district have risen 1 percent in the last year, with declines in suburban Washington of just 2.1 percent.

Washington ranks as the 50th most-expensive office rental market in the world, with average Class A rents of $51.74 per square foot.

New York retains the title of most expensive North American market, with Midtown rents of $68.93 per square foot, but New York ranks only 24th globally.

London’s West End, where rents have declined 17.8 percent in the last year, remains the world’s most expensive market, at an average of $184.85 per square foot.

Tokyo, Hong Kong, Moscow and Paris follow London among the world’s most expensive office rental markets.

Unemployment in the Washington region rose slightly in October, according to government data released Wednesday, as hiring tapered in the professional and business services sector and job losses continued in construction and retail.

By V. Dion Haynes, Staff Writer
Washington Post
Thursday, December 3, 2009

The area’s unemployment rate for October — not seasonally adjusted — was 6.2 percent, the same level the Bureau of Labor Statistics initially posted for metropolitan Washington in September. But on Wednesday, the BLS revised the September figure downward to 6.1 percent.

The federal government, which has protected the region from the full brunt of the recession, continued to be the strongest sector, with a net gain of 12,700 workers from the previous October, compared with an increase of 11,200 from September to September. As a result, the region’s unemployment rate falls well below the nationwide not-seasonally-adjusted rate of 9.5 percent for October.

Still, job gains were offset by continued losses in construction and retail, as well as a slowdown in hiring in some typically strong sectors such as professional and business services.

“Although the federal government is hiring, there still is a significant slack in the labor market. There will have to be hiring [in nongovernment sectors] for several quarters to bring the rate down,” said Glenn Wingard, an economist at Moody’s Economy.com.

The problem is that people who lost their jobs in retail and construction “don’t have the skills to obtain federal jobs,” Wingard said. “We’ll have to see a pickup in consumer spending [for the nongovernmental sectors to improve] and for the labor market to normalize.”

Some economists said they were concerned about a change in hiring in professional and business services — the area’s largest sector, which includes lawyers, accountants, federal contractors, architects and temp agencies. The year-to-year net gain in October was 100 jobs, compared with 1,500 in September.

“It’s our bread and butter — it’s so much bigger” than the federal government, said Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University. “I’ve never seen it” add so few jobs, he said.

Hiring has been especially slow at temp agencies.

“Our numbers are down by half from what they were a year ago,” said Wendy Zanarotti, associate director of a D.C.-based firm called Help Unlimited Temps, which provides administrative assistants mainly to nonprofit organizations. “They’re not getting the projects, so they don’t need the extra help.”

As a result, the company is launching a concierge service that will offer laundry pickup, grocery shopping and gift-wrapping to individuals and businesses. “We’re doing what we can do to stay in business,” she said.

From October 2008 to October 2009, according to the government data, the region lost 23,900 jobs. That is an improvement from September, when the year-to-year job loss reached 36,200, and in August, when it peaked at 40,400. Local economists said they think the area’s unemployment rate will continue to climb over the next few months, probably peaking slightly below 7 percent in January, when retailers cut their holiday workforce.

Job losses in the hardest-hit sectors slowed in October. The year-to-year loss in retail was 13,200, compared with 14,000 in September. Construction lost a net 14,800 jobs in October over the 12-month period, compared with 15,500 in September.

Even with the area posting a better unemployment rate than other major metropolitan regions, employers here are still cautious. Tim Namie, managing director of Manpower Professional employment services for the Southeast, which includes Washington, said a recent survey showed that employers in the D.C. area trail their counterparts across the nation in their plans to increase their full-time staff but are ahead in their plans to cut staff.

In the survey, Namie said, 10 percent of Washington area employers said they planned to hire more workers in the fourth quarter, compared with 12 percent in the national poll. Moreover, 15 percent in the Washington area said they would reduce payroll, compared with 14 percent nationally.

“It did surprise me,” Namie said. “Historically, the D.C. metropolitan area has benefited from federal spending.”

Late this afternoon, Northrop Grumman announced that it plans to move its corporate HQ from Los Angeles to the DC region by 2011, joining the likes of CSC and SAIC to move its home base here.

The company says it will pick an exact location by this spring and move by the following summer. The new HQ will include only 300 corporate employees, but shows the importance the 120,000 employee company sees in having its corporate base near the seat of the federal government. “As a global security company with a large customer base in the Washington, DC region, this move will enable us to better serve our nation and customers,” said CEO Wes Bush.

Micro-Markets Emerge

Traditional economic analysis has provided an overview of a local market with information on a variety of submarkets.  We believe these general perspectives are valid, but frequently deceptive.  The problem is that generalized views are grossly inadequate in describing the reality of the terms and conditions currently available for space of different location, size, quality and term—so much so that even the submarket view is misleading on a client-to-client basis.  The perspective that best describes the competitive playing field is the Micro-Market.  It’s easy to blame the financial media for this pervasive deception, especially when the markets are down.  After all, bad news tends to be good press and simple messages are easier to report.  However, many industry experts miss the truth when it comes to fully describing the economic conditions of our real estate markets.  Micro-Markets are too complicated and quickly moving to easily track.

Ultimately, the only constant truth is that reality is a function of perspective.  In the case of commercial real estate, market perspective is the combination of location, size, quality and term. For example, a tenant requiring a large block of long-term, trophy-quality space may be paying at least double the rent of another tenant looking for a small piece of Class A space across the street. In this reality, one organization’s “tight” market is another’s “soft” market. 

There is a lot of subject matter to cover concerning Micro-Markets.  However, the key point to remember is the generally “soft” market in our Metro Area does not mean that all tenants will have their pick of space for low rents and high concessions.  Mostly there are abundant opportunities, but sometimes the pickings are thin.  A more thorough review of this subject is better suited for a separate article from this quarterly market report.  Additional information on this topic will be published in the near future.  Please check back with the “News & Insights” section of our web site.

We seek refuge from uncertainty in the comfort of the familiar.  In this instance, the familiar is the view that the Washington, DC Metropolitan Area markets generally move together.  It should provide some measure of comfort to our readers (and consistency to our reports) to reveal that the office leasing market across our Metro Area gained strength last quarter.  Although the overall vacancy rate crept up slightly (a 0.2% increase to 13.5%), all signs indicate that a recovery is already underway.  In the first quarter of this year, absorption(1) is up in all jurisdictions (totaling approx. 300,000 sq. ft.), rental rates are rising (as well as concessions), available sublease space is down by approx. 250,000 sq. ft., and investment sales are starting to come back.  The vacancy rate increased due to deliveries of 11 new buildings (totaling over 1.3 million sq. ft.).  Another 6.5 million sq. ft. of new space remains under construction, but most of that space is already spoken for. 

Vacancy rates have peaked and new building starts have ceased.  Nothing new is about to be built without a significant pre-lease.  The market will have to feed off of the current supply of space for at least the next 3 years.  Depending upon the micro-market, attractive leasing opportunities should remain available for the next 12 months or so, as choice space in the current inventory is absorbed.  Therefore, 2010 presents an ideal time for tenants to negotiate new office leases for two key reasons:  high vacancy rates and no new project starts. 

Economic indicators continue to show that the recovery is gaining traction slowly but surely.  Current forecasts target approximately 4%-4.5% growth of GDP.  Since 2Q09, this recovery has been driven by cost-cutting and greater efficiencies.  Job growth has only started to come into play.  When new hiring starts in earnest, we will see higher absorption levels of vacant space. 

As a tenant representation organization, we love seeing these conditions in the market.  It presents an ideal time to capitalize upon the market’s weakness and strike better deals for our clients. How long will the good times last? We believe that the sweet spot for concessions will occur for at least the next two quarters of 2010.  Landlord confidence (and rates) will probably pick up at the end of the year.  Unfortunately, once the wave of buildings currently under construction has been delivered, nothing new will be built for a while.  There may be the occasional pre-leased building, but speculative development will be taking a holiday for the foreseeable future.  It’s too early to speculate how tight the market may become a few years from now, but we believe that Downtown DC and suburban markets inside the Beltway will return to a 6-8% vacancy rate before the end of 2012.

One interesting phenomenon of the financial crisis remains the upside-down cost of owning vs. leasing.  Traditionally, leasing has been the least expensive method of occupying office space.  Now that the cost of borrowing is around 6% – 6.5% and sale prices are flat, the cost of owning is frequently less expensive than leasing office space.  Owning isn’t the right decision for every organization.  If your organization is relatively stable in size and is able to pull together the equity required for a purchase, you may want to include purchase opportunities in your mix of options.

But What Does It Mean?

• The Vacancy Rate peaked at 13.5%.
• Approximately 6.5 Million square feet of new office supply still under construction, but no new office building starts are planned for the foreseeable future.
• The first half of 2010 should offer the “best terms for the best space,” although “good” deals should be available for at least the remainder of the year.
• Low interest rates and depressed sales prices have made the cost of owning lower than renting in many submarkets.
• Effective rental rates have decreased by more than 10% over the past year as concessions have increased. 
• Construction costs remain low (down 20-25% over the past 12 months) resulting in the return of “turnkey” build-outs.

(1) Absorption is the net change in occupied space over a given period of time. For example, if an organization vacates 10,000 sq. ft. of leased space and moves into 12,000 sq. ft. of space, the result is 2,000 sq. ft. of positive net absorption.  If an organization vacates 10,000 sq. ft. and moves into 8,000 sq. ft., the result is 2,000 sq. ft. of negative net absorption.  For a glossary of other commercial real estate terms, please refer to: Real Estate Glossary

For those that are ready to act in pursuit of an objective, uncertainly creates openings that aren’t normally available. This principle works effectively on many levels, from martial strategy to business negotiations. The current market continues to present plenty of uncertainty for tenants and landlords alike. The question is how will your organization take advantage of these opportunities while the market remains decidedly tenant friendly?

We believe that vacancy rates in our region have peaked and we will be feeding off of the oversupply for the next 3 years. However, the prime window of opportunity will remain open for the next 12 months or so as the best space in the current inventory is absorbed. There are still new office buildings under construction (almost 6 Million square feet) but new building starts have ceased. Six million square feet of new may sound like a lot of space, but it’s only 1.3% of the DC Metro inventory and much of this has already been pre-leased. Therefore, 2010 presents an ideal time for tenants to put uncertainty to their advantage for two key reasons: high vacancy rates and no new project starts.

The vacancy rate for the DC Metro Area has held steady at 13.3% for the past 2 quarters. Absorption was strong in the last quarter as almost one million square feet of additional space was leased while just over one million square feet was delivered. For the year, absorption across the DC Metro Area totaled a negative 360,000 square feet. The District was the biggest loser of 2009 in the DC Metro Area, shedding over 440,000 square feet of office space. Rental rates may not have dropped significantly, but we have seen concessions continue to increase. For example, a few leases to Blue Chip tenants in the District have included 8-11 months of free rent and improvement allowances of $80-100 per square foot. While these concession packages are fairly huge, keep in mind that full service rental rates in new buildings are still in the upper $60’s to mid $70’s per square foot.

As we predicted last quarter, indicators now show that the recovery started in the 2nd quarter 2009 (3.5% increase of GDP). However, this recovery is being driven by cost cutting and greater efficiencies. Job growth has yet to come into play and until new hiring starts in earnest we will not see steady absorption of vacant space.

As a purely tenant representation organization, we love seeing this type of uncertainty in the market. It gives us an ideal time to capitalize upon landlords’ uncertainty and strike the better deals for our clients. So, how long will the good times last? The best deals for the best space as the market is now (for tenants), we believe that the sweet spot for concessions will occur for at least first two quarters of 2010, then landlord confidence (and rates) will probably to pick up in the fall. However, once the wave of buildings currently under construction have delivered, nothing new will be developed for a while. There may be the occasional pre-leased building built, but speculative development will be taking a holiday for the foreseeable future. It’s too early to speculate about how tight the market may become a few years from now, but we believe that the DC area will be back to a 6-8% vacancy rate before the end of 2012.

One interesting phenomenon of the financial crisis remains the upside down cost of owning vs. leasing. Traditionally, leasing has been the least expensive method of occupying office space. Now that the cost of borrowing is somewhere around 6% and sale prices are flat, the cost of owning is frequently less expensive than the cost of leasing office space. Owning isn’t the right decision for every organization. However, if your organization is relatively stable in size and is able to pull together the equity required for a purchase, you may want to include purchase opportunities in your mix of options.

But What Does It Mean?

• The Vacancy Rate peaked 3Q09 and held steady 4Q09 at 13.3%.

• There is a small amount of new office supply still under construction, but no new office building starts planned for the foreseeable future.

• The first half of 2010 should offer the “best terms for the best space,” though “good” deals should be available for at least the remainder of the year.

• Very low interest rates and depressed sales prices have made the cost of owning lower than renting in many submarkets.

• Effective rental rates have decreased by more than 10% as concessions have increased along with lower coupon rental rates.

• Construction costs remain low (down 20-25% since over the past 6 months) resulting in the return of “turnkey” build outs.

Absorption is the net change in occupied space over a given period of time. For example, if an organization vacates 10,000 square feet of leased space and moves into 12,000 square feet of space, the result is 2,000 square feet of positive net absorption. If an organization vacates 10,000 square feet and moves into 8,000 sq. the result is 2,000 square feet of negative net absorption.

One of the things I’ll never understand about Star Wars is how Yoda and the rest of the Jedi could be so oblivious to the Sith threat right under their noses.  I mean, here’s the most evil master of the Dark Side meeting with the seemingly “all-knowing” Jedi Masters, manipulating The Republic, building 2 massive armies, and launching a galaxy spanning war, yet they’re totally dumbstruck when they finally realize who their true adversary really is.  If Yoda can feel when something is troubling one of his Jedi on a distant planet, why was he so surprised that his Sith foe was Chancellor Palpatine/Darth Sidious? To begin with, the guy was a politician!  If that doesn’t spark some level of suspicion in a Jedi’s mind, what kind of manipulative malevolent personality does?

I may not be able to use “The Force,” or even kick ass with a light saber, but I am aware of the hidden menace to the stability of our office market–namely Phantom Space.  By “Phantom Space,” I mean all that empty space that’s been stockpiled as surplus by various organizations and not advertised for sublease.  The phenomenon of Phantom Space typically occurs due to a variety of reasons, including: Insufficient Return, Air Pockets, Over Optimism and Security.

• Insufficient Return – This is when an organization views their excess space as not worth the effort/cost to sublease.  Perhaps the potential sublease rent will barely cover the cost of subleasing improvements and fees, or the net sublease revenue isn’t worth the trouble of finding a subtenant.
• Air Pockets – An organization may have a number of vacant offices scattered around different departments within their facilities.  However, the organization finds it impossible to consolidate the vacant portion of their premises into a separate sublease area.  In effect their empty spaces are like air pockets in various compartments of the organization.
• Over Optimism – Some organizations don’t want to give up any extra space because they don’t want to limit their ability to grow.  Sometimes this is a real concern, sometimes it’s a pipe dream and sometimes it’s just a power play to control more of an organizations’ budget and resources.
• Security – For those organizations that are unable to completely separate themselves from their subtenants, security may prove to be an insurmountable obstacle. Understandably, many organizations would rather sit on a copious amount of empty space than to give “strangers” unsecure access to their offices.

It doesn’t matter if the economy is going flat out or faltering, Phantom Space is always exists.  However, the phenomenon becomes a more significant factor during down/recovery times, as Phantom Space is typically absorbed before most organizations expand and add to market absorption.  So the real question is “How much Phantom Space exists”.  If Yoda couldn’t figure out that Palpatine was the bad guy, there’s no way I can see into the hidden vacancies that pervade the leased office space in our region–but I can make some estimated guesses.  Many organization carrying 3-5% of extra space, but would not count as adding to the Phantom Space inventory, as they don’t have enough surplus to effectively put onto the market.  However, an organization that’s banking at least 10% of space as vacant should be considered as part of the Phantom Space inventory.  If about 10% of organizations in the Washington DC Metropolitan Area carrying at least 10-15% extra space on average, then I’d estimate that our Phantom Space inventory equates to approx. 1-1.5% of the total market of occupied office space, or roughly 4-4.5 Million square feet of office space.  Annual absorption during the last growth period ranged from 4-6 Million square feet.  Therefore, our market should be carrying enough Phantom Space to provide for one year’s worth of growth for the region.  Fortunately for landlords, absorption doesn’t wait for Phantom Space to disappear.  Once a recovery is firmly under way, we’ve always seen strong levels of absorption of new space.  Nevertheless, the very real presence of Phantom Space serves to dampen companies’ appetites for growth space, especially during the early stages of a recovery period.

When historians look back at the rise and fall of various metropolitan centers in the 21^st Century, Washington, DC is certain to be listed among the great cities of the world for living, working and playing. Two-hundred twenty years after it’s founding, DC is finally fulfilling the promise of L’Enfant’s master plan to become not only the grand Capitol of the Republic, but our own Paris on the Potomac. It’s understandable that the majority of DC dwellers don’t have a daily appreciation of their town, especially from an historic perspective.  The quiet metamorphosis of the city has been overshadowed by the ear-splitting noise of elections, a severe recession, and more recently 2 wars and terrorist threats.  Thus it is easy to overlook the simple fact that Washington, DC is experiencing a true golden period.  Never in history of our city have we enjoyed the fruits of L’Enfant’s vision and our nation’s enduring resilience as we do today.  Those that lived in the Washington area through segregation, the riots in the 60’s and the long aftermath of racial tension, high crime and slow rebuilding, can appreciate the truly remarkable transformation undergone by the nation’s capitol. 

What makes a world class city?  The great cities of the world may be expensive, dirty, overcrowded and difficult to navigate.  The characteristics that separate exceptional cities from the other large urban areas are found when a metropolis is: 

• Able to project and influence policies throughout the world;
• A center of education and ideas;
• A bastion of creativity;
• A center for finance and business;
• A haven for the arts;
• Culturally diverse while reflective of the national identity;
• Rich in restaurants and culinary delights;
• Contain architecturally iconic structures and;
• Posses a unique vibe that gives it a palpable feel. 

Washington, DC qualifies in each of these critical categories.  DC has always been a center of influence and power by virtue of its role as the capitol of our Republic.  However, it is only recently that we’ve seen a confluence of developments that have transformed it into one of the great cities of the world.  What we need to remember is that the other great cities of the world did not become great overnight.  For example, Rome, Paris, London, New York and Tokyo were all centuries in the making or maturing.  Rome had a long, slow start during the growth of the Roman Republic.  It was such a stinking eyesore that Nero took some measure of delight in allowing it to burn so that it might be rebuilt in the splendor that reflected the wealth and glory of Rome.  Paris was a small fortress town, home of the King of France, when the King’s lands were only one province of Gaul.  Over 600 years had to pass before the King effectively controlled most of the area we think of as “France” and another 500 for Paris to become the City of Lights. , London (Londinium) was founded by the Romans as a muddy town with mercantile importance, open sewers and a vocal and violent working class.  Under the Romans, Londinium wasn’t even the capital city of Britain.   About 16 centuries went by before London really started to prosper,  However, it wasn’t until England was able to grow its empire through colonalzation in the 17th &18^th Centuries that London came into its own.  Tokyo was built from scratch as a new capital (like DC, but without L’Enfant’s master plan) at the beginning of the 17^th Century and kept isolated from the rest of the world for over 250 years.  Tokyo remained a xenophobic bastion of wooden buildings until after World War II. It wasn’t until after Japan emerged as a world economic power that Tokyo truly blossomed.  New York was quickest to reach world class status, but even “The Big Apple” (originally founded by the Dutch as New Amsterdam) took well over a century to become a significant metropolis.  Keep in mind that after the first 150+ years of English settlements in North America, the leading metropolitan area of the American Colonies was Philadelphia and remained so until the end of the 18^th Century.

To understand a bit about how Washington has evolved over the past 220 years, it helps to remember how we got here. Let’s touch on some of the highs & lows:

1790 – After the Constitution is ratified in 1789, Alexander Hamilton and Thomas Jefferson broker a deal for the republic to finance its Revolutionary War debt, provided that the capitol city is located in the south. A diamond shaped parcel straddling the Potomac River measuring 10 miles per side, is selected by George Washington and carved out of Maryland and Virginia (present day Arlington County) to become the District of Columbia.  Pierre L’Enfant, veteran of the Revolutionary War and student of complex geometric angles, lays out the streets, avenues and circles that will befuddle every visitor for all time’s sake, as well as the locations for the three pillars of the Republic, Executive Mansion, Capitol building and Supreme Court.  Today it’s difficult to appreciate how the federal government was so weak that it needed it’s own district in which to conduct its affairs. Before establishing a capitol city, the federal government had no permanent home and was dominated by the powerful state governments that had served as Congress’s host.

1790’s – John Adams becomes the first President to take residence in the White House and moves into a construction site.  For those that have lived through a home renovation, you can probably sympathize with our 2^nd President, as only 6 of it’s 30 rooms were plastered by the time he moved in.  At this time, the state of the White House provided an example for the state of the District and our republic—grand ideas with tremendous potential, but a huge task had just been undertaken.  Other than politicians and prostitutes, not a lot is going on in DC.  Of course, the oldest institutions of our city have proven to be the most enduring.

1814 – DC is attacked and set a blaze by the British during the War of 1812.  Dolly Madison makes use of her dress to sneak George Washington’s portrait out of the White House, past the Red Coats.  The Limey blackguards celebrate their big bonfire by boozing it up at Rhodes Tavern (near the current location of the Old Ebbit Grill) and watching the White House burn. Rumor has it that the burning of DC occurred two years after the beginning of the war because the British were unable to navigate through the maze of one-way streets and avenues that randomly start & stop.  Suffice it to say, other than the Capitol, White House and Treasury getting scorched, DC didn’t have a lot to lose, but it sounds like the publican at Rhodes Tavern knew how to throw a hootenanny.

Mid 19^th Century – A few decades after sacking the Capitol city of their former colony, British Foreign Service members sent to the US are given “tropical” pay bonuses to help compensate them for the swamp like humidity of the District—not to mention the backwater social scene.

1860’s – The Civil War brings great growth to the Federal Government—as well as 100 hastily erected earthen forts and batteries surrounding the District to defend the Capitol from Confederate attack.  After the war, the federal government firmly established it’s supremacy over the state and bureaucracy thrives.  The word “hooker” joins the American vernacular as a term of endearment for obliging ladies frequenting the camp of General Hooker’s troops while camped in Franklin Square (14^th & K).  Most streets remain unpaved, livestock graze on the White House lawn and in spite of the high war casualties, the District retains a surplus of politicians.

1870 – DC’s population reaches 132,000.  In an inspired moment of sobriety, President Grant authorizes $20 Million (about $360 Million in today’s dollars) to finally install some infrastructure in the Nation’s Capitol.  It takes a General to get some things organized—or at least make sure there’s a proper latrine in camp. Following Reconstruction, its pretty much status quo for the next 60 years.

1930’s & 40’s – The Federal Government grows like a green Lou Farrigno under FDR’s New Deal and keeps expanding during World War II.  Shortly after the Allied victory, DC’s population peaks at over 800,000. By this time, there are many places to live, thriving neighborhoods and a pesky social issue known as racial segregation.  There are hotels, night clubs, bars, street cars and relatively low crime, but DC at this time is a tale of 2 cities—White & Black and never the twain shall meet.

1968 – Rioting after the assassination of Dr. Martin Luther King devastates the the city core, particularly the U Street, 14^th Street, 7^th Street and H Street corridors. The riots drive a dagger into the heart and soul of the District.  Racial tensions remain high and, despite the end of segregation, the District remains racially divided.  Rock Creek Park separates the Black of DC from the White of DC.  For nearly 40 years, the only truly desegregated public gatherings are at RFK Stadium to cheer the Redskins.

1980’s – Commercial development in the East End begins to reclaim and rebuild former riot areas, especially along 14^th Street (now DC’s “Red Light” district).  The presence of hookers in Franklin Square demonstrates the cyclical nature of the universe, by returning to the grounds where they were named.  Nevertheless, DC’s still a ghost town downtown after 6 PM.

1990’s – The arrival of the MCI Center (now Verizon Center) heralds a new era for downtown DC.  Low interest rates and a depressed office market spur the development of residential units in the areas decimated by the riots.

2000’s – Washington’s neighborhoods are redeveloped in a wave of new construction.  Low interest rates, easy lending practices and speculative investment, drive development throughout the city and metro area.  Like all economic bubbles this one burst, but not before most residential areas, between Georgetown and Capitol Hill, saw significant redevelopment. For many, the high quality of city life trumped the pull of the suburbs with their congested traffic and cultural blandness.  A greatly improved city government, low crime, abundant local amenities, and hip vibe helped push the number of DC residents to over 600,000 for the first time since the 1950’s.  This densely packed, highly educated, affluent market is now supported by a plethora of services and amenities across the City.

When President Kennedy shared his feelings for our Nation’s Capitol almost 50 years ago, he famously commented: “Washington is a city of Southern efficiency and Northern charm.”  As a man who spent his entire adult career in government, I have no doubt that JFK was an expert on inefficiency.  Because our Capitol City straddles North and South, the District is neither northern nor southern but distinctively eastern.  Washingtonians may be short fused in their driving habits and more than a bit standoffish on the street but, compared to New York, Rome, Tokyo or Paris, the District has retained more than a little small town charm.

The real question is, “What are the elements that now define this so-called “Golden Period” for DC?  The answer is, because of the recent confluence of events and critical mass of residents living within DC’s borders, Washington City now has:

• Interconnecting neighborhoods that span uninterrupted from Georgetown to Capitol Hill
• Safe streets (No longer the “Murder Capitol,” the crime rate is at it’s lowest in over 20 years).
• World class cuisine – Hundreds of restaurants in every imaginable culinary style competing for a piece of the local market.
• Local Markets – Farmers’ Markets sprinkled throughout the city, DC’s own Fish Market, and abundant local grocery and specialty shops.
• Music Scene – Numerous excellent venues including 9:30 Club, Black Cat, DC9, Rock & Roll Hotel, and Blues, not to mention the mega venues such as Verizon Center Alley that host new, old, hip and up and coming acts.
• Pedestrian & Bicycle-friendly travel (DC has always been a great city to walk and the abundant dedicated bicycle lanes and trails arguably make this the most bicycle-friendly city in the US)
• Uniquely Washington experiences – U Street corridor, Georgetown, Fish Market, Eastern Market, Smithsonian and multitude of museums
• A Celebration of Diversity – Welcoming of the world’s cultures, supportive of gay rights and a spectrum of faiths.
• Quality of Architecture new & old – From the Greek revival structures of DC’s iconic monuments and government buildings, to the 19^th century structures echoing the best in a variety of European architecture to the Beaux-Arts, Art Deco and Post Modern structures of the 20^th Century.
• Abundant Green Space – Washington, DC is home to more trees than any other major city in the world including its famous cherry trees, tree lined streets and squares, and urban wilderness of Rock Creek Park.
• Thriving Creative Culture – A multitude of theatres including the nation’s leading Shakespeare theatre, pre-Broadway productions; active arts and gallery scene. 
• Financial Power – Washington has always been the epicenter of political power in our country, but since the financial meltdown of 2008, the federal government has become much more intertwined with the country’s major financial institutions.  While New York seems destined to remain the center of banking and our financial markets, the influence of Washington DC within those markets has been permanently strengthened. 

When waxing poetic about Washington, I frequently refer to DC as “Paris on the Potomac.”  While it may not be a bad comparison in terms of quality and amenities, the reality is that Washington City is cleaner and far more affordable than the City of Lights. There’s no comparison in livability or finding employment.  All in all, it’s a good time to be living, working and experiencing in the District of Columbia.

More unemployment figures are out today, and they show an increase in the District, Maryland and Virginia in January, despite a decrease in the U.S. jobless rate that month.

Unemployment in the District increased to 12 percent in January from 11.9 percent the previous month. Maryland’s rate climbed to 7.5 percent from 7.4 percent. And in Virginia it rose to 6.9 percent from 6.8 percent. At the same time, the U.S. rate dropped to 9.7 percent from 10 percent.

The rising jobless rate in D.C., Maryland and Virginia is actually good news, according to some economists, and the declining U.S. rate is bad news.

What? Economists explain it this way: The rising unemployment rate is a sign that long-term jobless people who stopped looking for work have re-entered the labor force and have resumed their search. They are looking for jobs because, possibly, they’ve seen evidence that the area’s economy is improving and that employers are beginning to look for workers. The declining national rate indicates that so-called discouraged workers have remained out of the labor force because they aren’t seeing any reason to look for work.

“Maryland, Virginia and the District are where the labor market is advanced in terms of recovery. Many people are beginning their job search, and as they begin, that rate gets higher,” said Anirban Basu, chairman and chief executive of Sage Policy Group, a Baltimore economic and policy consulting firm.

The Bureau of Labor Statistics bases the rates on a household survey of unemployed people. They are counted in the labor force only if they are actively looking for work.

“Nationally, many people will begin their job search and as they begin the job search that rate is set to rise,” he added.

– V. Dion Haynes