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Posts about Economic Development


Marriott is moving its headquarters to downtown Bethesda so it can be in a denser place that's closer to transit

Marriott International, a major local employer and national hotelier, is making an "in-town" move, relocating its headquarters from North Bethesda to downtown Bethesda. That sends an important message: walkable urban places and proximity to transit, specifically Metro but also the coming Purple Line, are economically crucial.

Photo by José Carlos Cortizo Pérez on Flickr.

Marriott International announced in March of 2015 that it would not be renewing the lease on its current Fernwood Road headquarters, inside the I-270 spur at the Beltway. According to Marriott CEO Arne Sorenson, it was "essential that we be accessible to Metro."

Today, Marriott International announced that it's moving to downtown Bethesda.

"It'll be great to have a more convenient option for public transportation," said a current Marriott employee who asked to remain anonymous. "Proximity to restaurants and shops is a great plus as well. Now we're next door to a mall, but it's good to have different options."

Younger workers want travel and lifestyle options, and Marriott's relocation is about competing for this workforce talent. It's worth noting that Marriott competitor Choice Hotels (think Comfort Inn) is also headquartered in Montgomery County, in an office building across the street from Rockville Metro.

Marriott International's current headquarters in a North Bethesda office park. Image from Google Maps.

Back when Marriott announced its coming move, Maryland, DC, and Virginia instantly went into battle mode over the $17 billion corporation, which the Washington Business Journal called "the hottest corporate relocation prospect currently in the market" because of its 2,000+ employees and its need for hundreds of thousands of square feet of premium office space.

With sequestration and base closures tightening the office market, developers were ready to fight for a big client. Regional elected leaders vowed to compete as well (though more voices are speaking up for regional cooperation, instead of a race to the bottom).

Marriott isn't the first company to want a move like this

In looking to relocate near Metro, the hotel giant is in step with a bigger trend. Suburban office parks all over our region are losing tenants to walkable urban places. Prior to Marriott's announcement, the company's current neighborhood office market in North Bethesda already had a vacancy rate of 19%.

The Marriott relocation will happen when the company's current lease ends in 2022. If that date sounds familiar, it's because it's the year Purple Line service is planned to begin! That powerful vibration you just felt is the synergy between economic development, land use, and transportation aligning in downtown Bethesda.

The exact site is still a mystery. The planned redevelopment of the Apex Building to make way for the Purple Line station only includes about half of the office space square footage that Marriott is looking for—and Marriott also wants to build a 200+ room hotel. We'll have to stay tuned for exactly where Marriott will go and how they'll find all that space in an already-dense urban place.

Virginia and Prince George's County probably never had a chance, given that Marriott CEO Arne Sorenson lives in Somerset—and CEO commute distance is a noted predictor of firm location. In that regard, today is not the big win for greater regional cooperation and jobs/housing balance that some hoped for.


As DC has grown, so has its racial prosperity gap

DC's economy has grown substantially since the Great Recession, but the number of residents below the poverty line is actually higher than it was in 2007, and people of color aren't making more money. That's according to US Census Bureau data that came out last week.

Photo by darius norvilas on Flickr.

The median income in DC reached $75,600 in 2015, an increase of about $4,000 over the previous year, and $13,000 above the pre-recession 2007 level, after adjusting for inflation. This gain follows the nationwide trend that median incomes are increasing.

Yet this growth has not reduced the city's poverty rate. Overall, 110,500 District residents lived below the federal poverty line in 2015 (income below $24,000 for a family of four)—that's 18,500 more residents living in poverty than in 2007. The city's poverty rate stands at 17 percent.

DC's black residents are bearing the brunt of the city's persistent poverty—moreover, they are the only racial or ethnic group to see an increase in their poverty rate since 2007. Some 27 percent of the city's black population lived in poverty in 2015, up from 23 percent in 2007. And nearly three-quarters of all District residents who live in poverty are black.

There also is a growing gulf between the incomes of white and black residents. The median income for white DC households was $120,000 in 2015, compared to just $41,000 for black households. While incomes have risen for white residents since 2007, the income of Black residents has been stagnant.

Education plays a huge role in shaping inequality

The large differences in poverty and income mirrors the city's racial disparity in educational attainment, which in large part reflects the history of discrimination and limited educational opportunities for African-Americans.

While nearly 90 percent of white DC residents have a college degree, just 26 percent of black residents do. Black residents are also much less likely to have a high school diploma: 15 percent of black residents aged 25 and older do not have a high school credential, compared to less than two percent of white residents.

Poverty is correlated with educational attainment, because without a high school diploma or a college degree, it is difficult to find and hold a good quality job. The poverty rate for DC residents with less than a high school degree was 33 percent in 2015, versus just five percent for those with a bachelor's degree, and twice the rate of the population overall.

These differences have been largely unchanged over time. DC residents without a college degree have seen falling wages, while college-educated residents have experienced an increase in pay, previous DCFPI research has found.

These data underscore the fact that the city's new and growing prosperity has left many poor residents and people of color behind.

What would help change all this?

DC should do more to ensure that all of its residents—including communities of color—share in the city's recent economic growth.

Potential policy changes could include:

  • Improving the quality of jobs for all working residents. This would mean mean requiring employers to offer additional hours to existing employees rather than hiring additional staff, giving workers advance notice of their weekly schedules, and creating a system to provide paid leave to workers who take time off for a personal illness or to care for a family member.
  • Expanding early childhood education subsidies. DC helps child care providers serve families who can't afford to pay full tuition rates, yet the subsidies rarely cover the full cost of high-quality childcare. Ramping up the amount of assistance will improve the ability of providers to serve infants and toddlers in DC while sustaining their businesses for the long-term. This will benefit low-income working families by helping to prepare their children for success.
  • Reforming the city's job training system. The District's education and job training programs must adapt to meet the growing need of DC residents and employers. Efforts should focus on offering entry-level jobs and career pathways for workers without advanced education. Given the large number of residents without a high school credential, reforms should focus on adult literacy as well as training and credentialing.
  • Take care of those who can't work. For people facing significant barriers to work, programs that give cash assistance, like Temporary Aid for Needy Families are extremely important. Right now, TANF has rigid time limits scheduled to go into effect next year. reforms are needed to keep vulnerable families keep from falling further into deep poverty.
Cross-posted from the DC Fiscal Policy Institute blog.


This building is very tall and very vacant

Our region's tallest building is in Rosslyn, and it has been vacant since the day it opened in 2013. That's because construction started during a time of economic prosperity but wrapped up during a downturn.

Image by Ron Cogswell on Flickr, with an editor's note.

The building at 1812 North Moore Street is 390 feet tallfor comparison, the Washington Monument is 555 feet.

You'd think that being right next to the Rosslyn Metro stop (which is also a bus hub) would make this 35-story building an ideal spot for all kinds of commercial tenants.

The problem is that from the time Monday Property and Goldman Sachs teamed up to develop the building in 2010, they never found a an organization to take on most of the lease, otherwise known as an "anchor tenant." It's ideal for commercial buildings to have anchor tenants before groundbreaking to guarantee a financial return on the building, and to help bring in other tenants.

The developers proceeded to build without an anchor tenant because at the time, our region's economy looked like it had successfully weathered the "great recession" thanks to stimulus funding and the reliability of government jobs. Monday and Goldman Sachs figured that even if a tenant wasn't lined up yet, they were sure to find one.

But the same year that 1812 North Moore got started, the region's job market started declining, which led to several large companies (Northup-Grumman, for example) and government agencies leaving Arlington. That included the federal government moving thousands of military jobs from Crystal City to the Mark Center, and eliminating others during sequestration. That created a glut in Arlington's office market that's taking a long time to fill.

Rosslyn's office vacancy rate tripled from 10 to more than 31 percent between 2011 and 2014, and 16 government defence agencies left Arlington County between 2005 and 2015. In 2015, the vacancy rate in Arlington was close to 21 percent, which was a historic high (DC never went above 12 percent).

What's keeping this building vacant? Here are a few reasons

Although the vast majority of office tenants these days want to be near Metro stations, downtown DC and Tysons Corner are competing much more strongly than they used to, making it harder for places like Rosslyn or Crystal City to fill office space. Downtown DC no longer suffers from negative image it had in the 1980s or 90s, and thanks to the Silver Line, Tysons Corner is in the game like never before.

(On a related note, buildings in Tysons will soon take the "tallest building in the region" crown.)

Also, eschewing the basic concept of supply and demand, the building's owners have not reduced their asking price for tenant leases, at least not as of late 2015

A final reason could be that though the economy has regained much of its steam from the 2008 downturn, the new economy is a lot different from the old one. More people are self-employed or work non-office jobs than before, and thanks to teleworking and increasingly paperless office environments, even large office-using employers fill less office space per worker than they used to. The farther you get from the DC core, the less demand there is for office space per capita in 2016 as there was just a few years ago.

Short of finding a tenant that wants to move in, 1812 North Moore will likely either need to cut its leasing price or sell to another investor.


This rule scattered "parking craters" around DC, but they're steadily disappearing

I recently wrote that a healthy downtown office market, plus a federal rule that has pushed offices outside downtown, have combined to fill in all of the "parking craters" in downtown DC. That doesn't mean they're totally gone, though. They've just moved to other places in the city.

Parcel A at the Yards, the largest "parking crater" in DC. Photo by Payton Chung.

Over the years, DC noticed the success it found in broadening the federal government's definition of the Central Employment Area, the space eligible for federal government offices. The District successfully lobbied the General Services Administration to widen the CEA further to encompass not just downtown, but also NoMa, much of the Anacostia riverfront, and the former St. Elizabeth's campus. Because the latter areas have much cheaper land than downtown DC, and lots of land to build huge new office buildings, federal offices are now drifting away from the downtown core.

A developer with a small site downtown usually won't bother to wait for a big federal lease, as the government wants bigger spaces at cheaper rents. It's easier to just rent to private-sector tenants. However, a developer with a large site within the CEA and next to Metro, but outside downtown, has a good chance of landing a big federal lease that could jump-start development on their land—exactly the formula that can result in a parking crater while an owner waits for a deal.

One recent deal on the market illustrates the point: the GSA recently sought proposals for a new Department of Labor headquarters. GSA wants the new headquarters to be within the District's CEA, within 1/2 mile walking distance to a Metro station, and hold 850,000 to 1,400,000 square feet of office space.

The kicker is the timeline: GSA wants to own the site by April 2018, and prefers if DC has already granted zoning approval for offices on the site. It would be difficult for a developer to buy, clear, and rezone several acres of land meeting those requirements within the next two years, so chances are that the DOL headquarters will be built on a "parking crater" somewhere in DC. Somewhere outside downtown, but within the CEA, like:

High-rise residential seems like it would be an obvious use for land like the Yards, which is outside downtown but atop a heavy-rail station. Yet even there, where one-bedroom apartments rent for $2,500 a month, it's still more valuable to land-bank the site (as parking, a small green area, and a trapeze school) in the hopes of eventually landing federal offices.

Many federal leases are also signed for Metro-accessible buildings outside the District, which helps to explain why prominent parking craters exist outside of Metro stations like Eisenhower Avenue, New Carrollton, and White Flint. (For its part, Metro generally applauds locating offices at its stations outside downtown, since that better balances the rush-hour commuter flows.)

One reform could fix the problem

One esoteric reform that could help minimize the creation of future parking craters around DC is to fully fund the GSA. Doing so would permit it to more effectively shepherd the federal government's ample existing inventory of buildings and land, and to coordinate its short-term space needs with the National Capital Planning Commission's long-term plans.

Indeed, GSA shouldn't need very many brand-new office buildings in the foreseeable future. Federal agencies are heeding its call to "reduce the footprint" and cut their space needs, even when headcount is increasing. Meanwhile, GSA controls plenty of land at St. Elizabeth's West, Federal Triangle South (an area NCPC has extensively investigated as the future Southwest EcoDistrict), Suitland Federal Center, and other sites.

However, ongoing underfunding of GSA has left it trying to fund its needs by selling its assets, notably the real estate it now owns in now-valuable downtown DC. GSA does this through complicated land-swap transactions, like proposing to pay for DOL's new headquarters by trading away DOL's existing three-block headquarters building at Constitution and 3rd Street NW.

In theory, it should be cheaper and easier for GSA to just build new office buildings itself. In practice, though, they've been trying to do so for the Department of Homeland Security at St. Elizabeth's West, and Congressional underfunding has turned the process into a fiasco.

Parking craters will slowly go away on their own

In the long run, new parking craters will probably rarely emerge in the DC area. Real estate markets have shifted in recent years: offices and parking are less valuable, and residential has become much more valuable. This has helped to fill many smaller parking craters, since developers have dropped plans for future offices and built apartments instead.

This now-closed parking lot in NoMa will soon make way for apartments. Photo by Payton Chung.

Even when developers do have vacant sites awaiting development, the city's growing residential population means that there are other revenue-generating options besides parking. "Previtalizing" a site can involve bringing festivals, markets, or temporary retail to a vacant lot, like The Fairgrounds, NoMa Junction @ Storey Park, and the nearby Wunder Garten. This is especially useful if the developer wants to eventually make the site into a retail destination.

Broader trends in the office market will also diminish the demand for parking craters, by reducing the premium that big offices command over other property types. Demand for offices in general is sliding. Some large organizations are moving away from having consolidated headquarters, and are shifting towards more but smaller workplaces with denser and more flexible work arrangements.

Unlike the boom years of office construction, there's now plenty of existing office space to go around. Since 1980, 295 million square feet of office buildings were built within metro DC, enough to move every single office in metro Boston and Philadelphia here. While some excess office space can be redeveloped into other uses, other old office buildings—and their accessory parking lots—could be renovated into the offices of the future.


These two Prince George's neighborhoods show how bike trails help neighborhoods

Riverdale Park and East Riverdale are two neighboring communities just east of Hyattsville in Prince George's County. One is thriving while the other has struggled. One reason could be that the Riverdale Park is near bike trails, while East Riverdale is blocked from them.

Riverdale Park and East Riverdale. Image by Dan Reed. Base map from ESRI, with boundaries from the Census Bureau.

As part of an effort to extend the WB&A Trail south toward DC, Bike Maryland and the Washington Area Bicyclist Association studied property values and housing patterns in several Prince George's county neighborhoods. The large differences in property values between neighborhoods with close proximity to bike trails and other nearby communities with few non-car transport options was striking.

As part of the study, the organization divided whole communities into those that have good access to trails (Hyattsville, Riverdale Park, Edmonston) and those that have poor bike access or are otherwise "carlocked" by major uncrossable roads (Woodlawn, East Riverdale, Landover Hills). They also looked at properties within 200 meters of a bike facility and those beyond 200m of a bike facility, both within communities and overall.

A heat map of bike infrastructure in Prince George's County. The area where Bike Maryland and WABA want to expand the WB&A Trail is circled in yellow. Image from Bike Maryland.

Two neighboring communities highlight the contrasts

For example, let's compare East Riverdale, where there is no safe place to bike or walk, either for recreation or for commuting and utility, with Riverdale Park, where there are far more options.

Riverdale is a burgeoning community with a lively farmer's market, a nascent craft beer scene, a weekly blues jam, and easy walking and bike access to the new Hyattsville Arts district and a revitalized Route 1, which has several new restaurants. A trendy new development anchored by a Whole Foods market is under construction just north of town.

But East Riverdale, which is just across Route 201, has been designated as a Transforming Neighborhoods Initiative community, meaning it faces "significant economic, health, public safety and educational challenges."

Riverdale Park. Base image from Google Maps.

East Riverdale. Base image from Google Maps.

Median housing values are more than $30,000 higher in Riverdale Park ($246,200) than in East Riverdale ($215,500), and assessments are about $50,000 higher ($215,800 in Riverdale Park vs. $163,700 in East Riverdale). Riverdale Park's value per acre ($995,000) is nearly 10 percent higher than East Riverdale's ($908,000).

Houses in East Riverdale are actually newer and larger than those in Riverdale Park. East Riverdale also has more single-family housing and fewer buildings with large numbers of units, there's more owner-occupied housing, and its houses have more rooms; all of these things are often associated with higher home values.

The demographic characteristics of the residents in Riverdale Park and East Riverdale are similar, with approximately half of the residents of Hispanic of Latino heritage (48% in Riverdale Park vs. 53% in East Riverdale). Downtown Riverdale Park has a MARC commuter rail station with some charming pre-WWII homes and cottages nearby, although the commercial area around it seemed relatively lifeless and contained several abandoned buildings until recently. On balance, looking at individual street views of East Riverdale's and Riverdale Park's housing stocks, it is certainly not obvious that East Riverdale would have dramatically lower housing values.

It's quite possible that the reason Riverdale Park is being revitalized while East Riverdale has struggled economically goes back to basic community design: East Riverdale's layout forces residents to drive everywhere, and residents can't easily walk to the market or ride their bikes to work.

Meanwhile, as younger residents who are not particularly attached to driving look for affordable place to live, Riverdale Park is a more attractive choice. The new energy attracted to the neighborhood creates an upward cycle of renovation.

To note: The comparison data on the housing characteristics and demographics of households in East Riverdale and Riverdale come from the US Census American Community Survey (ACS) for 2009-2013. Tax valuation data are from PG Atlas, gathered in June and July of 2015.

Can transit turn East Riverdale around?

Caption: East Riverdale is Blocked from the Anacostia Tributary Trails by a Major Highway, MD Route 201; map by Google maps.

It's possible that the Purple Line, which will affect East Riverdale more than Riverdale Park, may switch economic momentum back to the east over the next 10 or 20 years. The Purple Line and its feeder walks and bike routes (if any) should make it easier to get around without a car.

Granted, a more desirable neighborhood layout, with more transportation options, will attract higher income residents, who, in turn, attract more businesses and amenities, making the neighborhood even more desirable in an self-reinforcing cycle. It is very difficult, and can be a fool's errand, to try to accurately say that any one item makes a neighborhood more or less desirable when every contributing factor is related to every other!

But we certainly want to make county leaders aware of the fact that the carlocked neighborhoods in Prince George's County contribute much less per acre to county's tax rolls than trail-accessible neighborhoods. We hope our county will agree to build more great bike trails in the county and thereby test our hypothesis that unlocking carlocked neighborhoods could lift whole communities!


Bike paths are good for business, says the president of the Prince George's Chamber of Commerce

Some people were skeptical that Shortcake Bakery would succeed. After all, it's next to grungy strip of auto repair shops along Route 1 in Hyattsville. But David Harrington, the president of the Prince George's County Chamber of Commerce, whose wife opened the bakery, says the shop's location had an "unexpected asset": a nearby bike path.

David Harrington was the featured speaker at a economic development conference hosted by the Greenbelt Community Development Corporation last month. His personal experience with how bike trails can be advantageous for businesses was just one of the things he talked about.

"I can tell you one of the unexpected assets that we have at the bakery is that it is near a bike path," said Harrington, referring to the Northwest Branch Trail, which is part of the Anacostia Tributary Trail system. "Cheryl and I always pray for good weather on Saturdays," he added, saying that when that happens "we may have 30 [cyclists] stop at Shortcake Bakery as they're going to Baltimore, going to College Park. It is a wonderful business asset."

Base image from Google Maps.

"If you create these bike paths and create nice connectors for bicyclists to do commerce, that is an amazing business opportunity," he continued. "Walkability and bikeability are strong economic tools that can help create entrepreneurship, and I think we need to look at that a lot closer than we are."

The Old Greenbelt Theater hosted the conference. Here's a link to the full video:

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