WASHINGTON, DC—Development in the Union Market sub-district is moving forward at warp speed. In the space of about three years it has gone from an underdeveloped fringe area of the District to one where institutional developers and capital sources are elbowing each other to get a piece.
One of the early investors was local developer Level 2. Some two years ago Level 2 went under contract with Edens (another early investor) to buy the residential development rights at a site Edens planned to develop at 1270 4th St., NE, once the entitlements went through.
Traditionally Edens, a retail developer, will own the entire retail building but for urban projects it usually opts own the first floor and sell the residential development rights over the retail component as it did with another Union Market project, The Edison at Gateway Market.
The entitlement rights came through recently and per the contract Level 2 moved to close on the sale. As it did it brought in an equity partner, Trammell Crow Residential, via MAC Realty Advisors, which arranged the joint venture between the two companies.
The project, whose development costs are expected to total $148 million, will be a 400,000-square foot, luxury residential apartment on top of the high-end market concept Edens is developing and will continue to own.
Developers are moving at a blistering pace to build up this part of town, Andrew McAllister, executive director at MAC tells GlobeSt.com. Union Market is well on its way to becoming a unique urban environment where people are clamoring, or will be clamoring to live and shop, he said.
Right now, though, "it's a land grab with institutional developers and capital sources pushing to be a part of the picture," he said.
"This area has become institutionalized faster than any other in the District that I have seen," McAllister added. "I worked on the 14th Street Corridor years ago and this is much like that -- but at a much compressed time frame."
Interest in Union Market has proliferated since the early days when Level 2 and Edens was taking measure of the neighborhood, Level 2 Principal David Franco tells GlobeSt.com.
"There is enormous opportunity here still," he said. One market study puts the development pipeline for Union Market at 8 million square feet over the next ten years, he said.
A good bit of that will be by Level 2, which is starting work not only on 1270 4th St., NE, next year around Springtime, but also on the Highline at Union Market, a project with which it is partnering with Clark Enterprises.
Located at 320 Florida Ave NE, it is currently a Burger King, but the Planned PUD recently was approved for a 313-unit mixed use complex that will have 9,880-square feet of retail and total about 227,089 square feet. Now Level 2 is in the schematic design phase and plans to start development in September 2016, several months after it has shoveled dirt for project at 1270 4th St., NE.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
