CRE in DC

[Anonymous]

The short term one time SNAP benefits were not something DC could really afford. The one time federal $ for covid is over.

[Anonymous]

Anonymous wrote:Cue the idiots ready to come in and cheer on mixed use housing without having a clue on the tax implications and the complete lack of resources downtown.

City Ridge also seems to be floundering. See thread on IB putting ENTIRE BUILDING up for sublease recently. That space being vacant obviously impacts the other businesses that have opened there. There don't seem to be takers for the large space Fannie Mae moved to, that it is vacating early. Was pretty empty even before covid on that stretch of L and in that development.

[Anonymous]

^https://www.dcurbanmom.com/jforum/posts/list/1183260.page

[Anonymous]

Taxes going up in a time of rising random violent crime is not super appealing. The federal funds sunsetting was a GIVEN, why are they compelled to spend $ they don't have? So irresponsible, esp. when EHN has warned about not creating an opportunity for a control board to come in again. They are acting as though the businesses and CRE revenue leaving doesn't matter but it is the foundation of the budget, the bike lanes, the vouchers, and all the other necessities and goodies. DSA activists may not be aware but why are the Council so clueless? None of them have another job that they always seem to be taken by surprise. Only Cheh did.

In this spiral what exactly will attract new businesses? Even tourists?

[Anonymous]

Commercial Real Estate
D.C.'s commercial tax base in a multibillion-dollar free fall

https://www.bizjournals.com/washington/news/2024/02/02/dc-economy-commercial-tax-base-loss.html

Seems to be happening even sooner than expected.

[Anonymous]

From DC Line today:

A tough budget year ahead, DC officials warn

Top DC officials pointed to challenging budget deliberations ahead as they released last year's Annual Comprehensive Financial Report, which showed a surplus for fiscal year 2023 that wasn't sufficient to fully replenish two key reserve accounts.

"While the District ended the last fiscal year in the black, that excess is already spoken for, so we will need to make some tough choices in the FY25 budget," DC Council Chair Phil Mendelson tweeted.

At a DC Council oversight hearing yesterday afternoon, Chief Financial Officer Glen Lee testified the District's financial health remained strong despite fiscal challenges. During FY 2023, the District experienced modest revenue growth overall — despite declining commercial property tax collections due to the weak office market — because of increases in other areas, including sales taxes fueled by a rebound in tourism and convention activities.

Lee and City Administrator Kevin Donahue noted that this was the District's 27th consecutive clean audit and the ninth straight year with no "material weaknesses" identified by the independent auditors. The District has 51 days of cash on hand via its reserve accounts, but that falls short of the 60-day target to ensure enough working capital and liquidity.

"The FY25 budget will be the most difficult budget we’ve faced since the Great Recession of 2008," Donahue tweeted in a summary of his presentation at yesterday's hearing on the ACFR's release.

While the DC government's operating costs continue to rise due to inflation and other factors, revenue is not keeping pace. Revenue grew 21% between fiscal years 2020 and 2022, Donahue said, but it is projected to increase by just 1% between fiscal years 2022 and 2024.

Meanwhile, Lee said that $322 million will have to be allocated over the next two years to restore the District's cash flow and fiscal stabilization reserve accounts to full strength. There's also no more federal COVID-19 relief funding available.

"COVID-19 stimulus period spending levels are simply financially unsustainable," declared one of Donahue's PowerPoint slides.

— 'D.C.'s commercial tax base in a multibillion-dollar free fall.' WBJ's Michael Neibauer: "The taxable assessed value of commercial property in D.C. has fallen by nearly $12 billion in two years, reflecting the massive challenges facing the District’s office market and its economy overall.

"For fiscal year 2023, which ended Sept. 30, the assessed value of all taxable commercial property in Washington came in at $101.18 billion, down from $102.7 billion in 2022 and $112.7 billion in 2021, according to the District’s 2023 Annual Comprehensive Financial Report, released Thursday. That two-year decline represents more than $200 million in foregone tax revenue — there are multiple tax rates depending on a property’s value, occupancy and condition." [WBJ]

[Anonymous]

Anonymous wrote:From DC Line today:

A tough budget year ahead, DC officials warn

Top DC officials pointed to challenging budget deliberations ahead as they released last year's Annual Comprehensive Financial Report, which showed a surplus for fiscal year 2023 that wasn't sufficient to fully replenish two key reserve accounts.

"While the District ended the last fiscal year in the black, that excess is already spoken for, so we will need to make some tough choices in the FY25 budget," DC Council Chair Phil Mendelson tweeted.

At a DC Council oversight hearing yesterday afternoon, Chief Financial Officer Glen Lee testified the District's financial health remained strong despite fiscal challenges. During FY 2023, the District experienced modest revenue growth overall — despite declining commercial property tax collections due to the weak office market — because of increases in other areas, including sales taxes fueled by a rebound in tourism and convention activities.

Lee and City Administrator Kevin Donahue noted that this was the District's 27th consecutive clean audit and the ninth straight year with no "material weaknesses" identified by the independent auditors. The District has 51 days of cash on hand via its reserve accounts, but that falls short of the 60-day target to ensure enough working capital and liquidity.

"The FY25 budget will be the most difficult budget we’ve faced since the Great Recession of 2008," Donahue tweeted in a summary of his presentation at yesterday's hearing on the ACFR's release.

While the DC government's operating costs continue to rise due to inflation and other factors, revenue is not keeping pace. Revenue grew 21% between fiscal years 2020 and 2022, Donahue said, but it is projected to increase by just 1% between fiscal years 2022 and 2024.

Meanwhile, Lee said that $322 million will have to be allocated over the next two years to restore the District's cash flow and fiscal stabilization reserve accounts to full strength. There's also no more federal COVID-19 relief funding available.

"COVID-19 stimulus period spending levels are simply financially unsustainable," declared one of Donahue's PowerPoint slides.

— 'D.C.'s commercial tax base in a multibillion-dollar free fall.' WBJ's Michael Neibauer: "The taxable assessed value of commercial property in D.C. has fallen by nearly $12 billion in two years, reflecting the massive challenges facing the District’s office market and its economy overall.

"For fiscal year 2023, which ended Sept. 30, the assessed value of all taxable commercial property in Washington came in at $101.18 billion, down from $102.7 billion in 2022 and $112.7 billion in 2021, according to the District’s 2023 Annual Comprehensive Financial Report, released Thursday. That two-year decline represents more than $200 million in foregone tax revenue — there are multiple tax rates depending on a property’s value, occupancy and condition." [WBJ]

Sorry, but how the hell does a drop in property valuation of ~$1.5 billion result in a tax reduction of >$200mm? The tax rate on CRE isn't freaking 13%!

[Anonymous]

Anonymous wrote:

Anonymous wrote:From DC Line today:

A tough budget year ahead, DC officials warn

Top DC officials pointed to challenging budget deliberations ahead as they released last year's Annual Comprehensive Financial Report, which showed a surplus for fiscal year 2023 that wasn't sufficient to fully replenish two key reserve accounts.

"While the District ended the last fiscal year in the black, that excess is already spoken for, so we will need to make some tough choices in the FY25 budget," DC Council Chair Phil Mendelson tweeted.

At a DC Council oversight hearing yesterday afternoon, Chief Financial Officer Glen Lee testified the District's financial health remained strong despite fiscal challenges. During FY 2023, the District experienced modest revenue growth overall — despite declining commercial property tax collections due to the weak office market — because of increases in other areas, including sales taxes fueled by a rebound in tourism and convention activities.

Lee and City Administrator Kevin Donahue noted that this was the District's 27th consecutive clean audit and the ninth straight year with no "material weaknesses" identified by the independent auditors. The District has 51 days of cash on hand via its reserve accounts, but that falls short of the 60-day target to ensure enough working capital and liquidity.

"The FY25 budget will be the most difficult budget we’ve faced since the Great Recession of 2008," Donahue tweeted in a summary of his presentation at yesterday's hearing on the ACFR's release.

While the DC government's operating costs continue to rise due to inflation and other factors, revenue is not keeping pace. Revenue grew 21% between fiscal years 2020 and 2022, Donahue said, but it is projected to increase by just 1% between fiscal years 2022 and 2024.

Meanwhile, Lee said that $322 million will have to be allocated over the next two years to restore the District's cash flow and fiscal stabilization reserve accounts to full strength. There's also no more federal COVID-19 relief funding available.

"COVID-19 stimulus period spending levels are simply financially unsustainable," declared one of Donahue's PowerPoint slides.

— 'D.C.'s commercial tax base in a multibillion-dollar free fall.' WBJ's Michael Neibauer: "The taxable assessed value of commercial property in D.C. has fallen by nearly $12 billion in two years, reflecting the massive challenges facing the District’s office market and its economy overall.

"For fiscal year 2023, which ended Sept. 30, the assessed value of all taxable commercial property in Washington came in at $101.18 billion, down from $102.7 billion in 2022 and $112.7 billion in 2021, according to the District’s 2023 Annual Comprehensive Financial Report, released Thursday. That two-year decline represents more than $200 million in foregone tax revenue — there are multiple tax rates depending on a property’s value, occupancy and condition." [WBJ]

Sorry, but how the hell does a drop in property valuation of ~$1.5 billion result in a tax reduction of >$200mm? The tax rate on CRE isn't freaking 13%!

This article posted Friday says the tax assessed value of DC commercial real estate has fallen by $12B in the last two years.

https://www.bizjournals.com/washington/news/2024/02/02/dc-economy-commercial-tax-base-loss.html

[Anonymous]

Anonymous wrote:

Anonymous wrote:DC has some of the lowest property taxes in the Region, so they have room to increase taxes to makeup or much of the lost CRE revenue. Even with modest increase to their property tax, the overall tax burden will still be quite a bit less than Maryland.

The problem with this is that DC could end up mimicking Baltimore with its very high tax rates, which pushes away potential residents.

DC needs to crack down hard on crime ASAP.

Baltimore IS doing so, DC doubling down on the policies that got us here. The vote on Pinto's bill was slow rolled to allow the anti-carceral activists, increasingly strident, to ramp up PR campaigns.

What about this act, by the Chair, quite recently, suggests a fundamental shift?

The vote was paused due to media attention but it will go forward. Mendo had the votes, only Pinto and Bonds spoke out re: victims and the murderer having no relevant expertise, not to mention the lawyers, judges and academics who make up the Sentencing Commission, objecting. One activist group openly boasts about drafting 4+ bills for the Council. The Council is captured and quite out of step with mainstream approaches that have been effective against crime, even just up 95.

[Anonymous]

Businesses, including Leonsis, have been screaming into the void for years now, this was predicted. And the Council has continued to spend, spend, spend, recklessly, along with their reckless coddling of criminals.

https://www.globest.com/2022/12/01/cre-firms-collapsing-office-values-threat-to-dcs-fiscal-health/?slreturn=20240104110851

https://wtop.com/dc/2023/03/monumental-sports-beefs-up-security-as-dc-police-presence-diminishes-downtown/

And now we are here

https://www.msn.com/en-us/money/realestate/fannie-mae-to-leave-downtown-dc-5-years-early/

https://www.bisnow.com/washington-dc/news/office/anchor-tenant-at-city-ridge-development-puts-full-building-up-for-sublease-122628

https://www.washingtonian.com/2023/12/21/the-caps-and-wizards-are-leaving-dc-whos-to-blame/

https://www.msn.com/en-us/news/us/why-is-fbi-headquarters-moving-out-of-dc-biden-administration-chooses-maryland-for-intelligence-agency-s-new-base/

https://www.bizjournals.com/washington/news/2024/01/30/costar-headquarters-dc-rosslyn-jbg-smith.html

etc., etc., etc. the pace will only escalate

What exactly would draw corporations to DC at this point? Millions saw the video re: the Brazilian tourist, punched in the face on WMATA train in Columbia Heights, suffering broken facial bones. Tourist money is not a given either.

DC has never been in a situation re: this kind of random, daytime crime downtown and on WMATA, nor has there ever been this kind of shrinkage of CRE. Most buildings cannot be affordably retrofit for housing due to HVAC and plumbing. There are already a huge number of residential units in the pipeline for NoMA and The Wharf, will there really be demand to absorb them? City Ridge is not even fully rented and the recent armed robbery outside Wegmans won't make it more appealing.

The other undeniable fact - in the 90s, when crime was more predictable and thus more easily avoided, DC was CHEAP. At present, it is one of the most expensive US cities as well as an outlier re: crime trends. Lots more changes to come, I expect. If interest rates were lower, more would likely already have relocated.

[Anonymous]

Anonymous wrote:Businesses, including Leonsis, have been screaming into the void for years now, this was predicted. And the Council has continued to spend, spend, spend, recklessly, along with their reckless coddling of criminals.

https://www.globest.com/2022/12/01/cre-firms-collapsing-office-values-threat-to-dcs-fiscal-health/?slreturn=20240104110851

https://wtop.com/dc/2023/03/monumental-sports-beefs-up-security-as-dc-police-presence-diminishes-downtown/

And now we are here

https://www.msn.com/en-us/money/realestate/fannie-mae-to-leave-downtown-dc-5-years-early/

https://www.bisnow.com/washington-dc/news/office/anchor-tenant-at-city-ridge-development-puts-full-building-up-for-sublease-122628

https://www.washingtonian.com/2023/12/21/the-caps-and-wizards-are-leaving-dc-whos-to-blame/

https://www.msn.com/en-us/news/us/why-is-fbi-headquarters-moving-out-of-dc-biden-administration-chooses-maryland-for-intelligence-agency-s-new-base/

https://www.bizjournals.com/washington/news/2024/01/30/costar-headquarters-dc-rosslyn-jbg-smith.html

etc., etc., etc. the pace will only escalate

What exactly would draw corporations to DC at this point? Millions saw the video re: the Brazilian tourist, punched in the face on WMATA train in Columbia Heights, suffering broken facial bones. Tourist money is not a given either.

DC has never been in a situation re: this kind of random, daytime crime downtown and on WMATA, nor has there ever been this kind of shrinkage of CRE. Most buildings cannot be affordably retrofit for housing due to HVAC and plumbing. There are already a huge number of residential units in the pipeline for NoMA and The Wharf, will there really be demand to absorb them? City Ridge is not even fully rented and the recent armed robbery outside Wegmans won't make it more appealing.

The other undeniable fact - in the 90s, when crime was more predictable and thus more easily avoided, DC was CHEAP. At present, it is one of the most expensive US cities as well as an outlier re: crime trends. Lots more changes to come, I expect. If interest rates were lower, more would likely already have relocated.

As the taxes on CRE dry up, DC will have to increase taxes on personal property and sales taxes. This will further exacerbate the death spiral.
I would also expect DC to try to get “creative” by taxing income earned in the District (i.e. taxing a worker who earns money in the District even though they don’t live there, regardless of whether they are tw or remote).

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:DC has some of the lowest property taxes in the Region, so they have room to increase taxes to makeup or much of the lost CRE revenue. Even with modest increase to their property tax, the overall tax burden will still be quite a bit less than Maryland.

The problem with this is that DC could end up mimicking Baltimore with its very high tax rates, which pushes away potential residents.

DC needs to crack down hard on crime ASAP.

Baltimore IS doing so, DC doubling down on the policies that got us here. The vote on Pinto's bill was slow rolled to allow the anti-carceral activists, increasingly strident, to ramp up PR campaigns.

What about this act, by the Chair, quite recently, suggests a fundamental shift?

The vote was paused due to media attention but it will go forward. Mendo had the votes, only Pinto and Bonds spoke out re: victims and the murderer having no relevant expertise, not to mention the lawyers, judges and academics who make up the Sentencing Commission, objecting. One activist group openly boasts about drafting 4+ bills for the Council. The Council is captured and quite out of step with mainstream approaches that have been effective against crime, even just up 95.

With the council members spending the majority of their time addressing a very vocal minority and holding pointless gripe sessions for the same minority, I am not surprised that they need to rely on non-profits and consultants to help draft legislation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Businesses, including Leonsis, have been screaming into the void for years now, this was predicted. And the Council has continued to spend, spend, spend, recklessly, along with their reckless coddling of criminals.

https://www.globest.com/2022/12/01/cre-firms-collapsing-office-values-threat-to-dcs-fiscal-health/?slreturn=20240104110851

https://wtop.com/dc/2023/03/monumental-sports-beefs-up-security-as-dc-police-presence-diminishes-downtown/

And now we are here

https://www.msn.com/en-us/money/realestate/fannie-mae-to-leave-downtown-dc-5-years-early/

https://www.bisnow.com/washington-dc/news/office/anchor-tenant-at-city-ridge-development-puts-full-building-up-for-sublease-122628

https://www.washingtonian.com/2023/12/21/the-caps-and-wizards-are-leaving-dc-whos-to-blame/

https://www.msn.com/en-us/news/us/why-is-fbi-headquarters-moving-out-of-dc-biden-administration-chooses-maryland-for-intelligence-agency-s-new-base/

https://www.bizjournals.com/washington/news/2024/01/30/costar-headquarters-dc-rosslyn-jbg-smith.html

etc., etc., etc. the pace will only escalate

What exactly would draw corporations to DC at this point? Millions saw the video re: the Brazilian tourist, punched in the face on WMATA train in Columbia Heights, suffering broken facial bones. Tourist money is not a given either.

DC has never been in a situation re: this kind of random, daytime crime downtown and on WMATA, nor has there ever been this kind of shrinkage of CRE. Most buildings cannot be affordably retrofit for housing due to HVAC and plumbing. There are already a huge number of residential units in the pipeline for NoMA and The Wharf, will there really be demand to absorb them? City Ridge is not even fully rented and the recent armed robbery outside Wegmans won't make it more appealing.

The other undeniable fact - in the 90s, when crime was more predictable and thus more easily avoided, DC was CHEAP. At present, it is one of the most expensive US cities as well as an outlier re: crime trends. Lots more changes to come, I expect. If interest rates were lower, more would likely already have relocated.

As the taxes on CRE dry up, DC will have to increase taxes on personal property and sales taxes. This will further exacerbate the death spiral.
I would also expect DC to try to get “creative” by taxing income earned in the District (i.e. taxing a worker who earns money in the District even though they don’t live there, regardless of whether they are tw or remote).

I thought the Home Rule legislation prohibited any form of commuter tax? DC leaves staggering sums on the table by having no reciprocity re: tickets. So much here makes NO sense.

https://dcist.com/story/21/10/14/dc-didnt-ask-northam-and-hogan-to-help-crack-down-on-unpaid-tickets-despite-initial-claims-it-did/

These really are uncharted times re: CRE, the base of any city's budget. This Council shows no sign of reining in spending unless forced to do so. The landing has not been planned for.

It's inevitable that tourism will take a hit too, with its many ripple effects when DC crime is covered outside US and tourists are attacked in DC

https://www.dailymail.co.uk/news/article-13043071/Pictured-Serial-carjacker-27-murdered-former-Trump-official-Mike-Gill-second-man-night-shot-dead-cops-crime-soars-AG-claims-arrests-prosecutions-wont-solve-crisis.html?ns_mchannel=rss&ns_campaign=1490&ito=social-twitter_mailonline

https://twitter.com/thesierrafox/status/1747439534759981217 over 5 million views re: assault on a tourist

Even Trayon White complained his car had been broken into on 2 occasions when attending an event at Cap One recently, along with hundreds of others. When people are more inclined to vacation, dine, shop and attend events outside DC, even DC residents, the spiral will accelerate.

[Anonymous]

The federal govt won't let it happen. They're gonna call everyone back.

[Anonymous]

Federal agencies will shrink footprints when leases expire.

Feds and DC govt workers are not big spenders on dining and after work recreation.