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Southwest DC: A Long-Term Winner Under Trump?

WASHINGTON, DC--There is a 54% rent premium for office product at the Wharf compared to other Southwest office product, JLL notes.

By Erika Morphy | erikamorphy | Updated on March 17, 2017

Capitol Riverfront scene. Photo credit: Capitol Riverfront BID. Capitol Riverfront scene. Photo credit: Capitol Riverfront BID.

WASHINGTON, DC–President Trump submitted his budget proposal for FY 2018 to Congress yesterday and as expected it contained severe cuts at many civilian agencies. It also called for a bump up in defense spending. By now we know how the story line plays out: Northern Virginia wins and the District, particularly the Southwest quadrant where many of these government agencies are located, loses. Loses bigly, one might say.

But in its first analytical pass at the proposed budget JLL makes an interesting observation:

Cuts to headquarter functions in Southwest could be a long-term benefit to real estate owners there as Mall-centric locations (such as recent disposition of Cotton Annex) could be disposed by GSA for private use. Consider this, there is a 54% rent premium for office product at the Wharf to other Southwest office product.

And as for the widespread assumption that Northern Virginia will come out ahead, JLL had this to offer:

The administration calls for cuts to non-mission critical functions and specifically calls out IT. In FY 2016, technology contracts represented 41% of overall contracts. Should IT budgets be cut, any growth of mission-critical contractors could be equally negated by technology-focused contractors and thus why, to date, contractor leasing activity in Northern VA has been very quiet despite increased investor demand and activity.

These are early days for the president’s budget proposal. It must be approved by Congress and only twenty-four hours in there are signs of significant resistance among both parties.

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