Southwest D.C. Developers See More Demand for Appartments, Hotels Than Ever Before
Jon Banister,Bisnow Washington, D.C
October 26, 2018
The opening of The Wharf, Audi Field and other amenities in Southwest D.C. are turning the neighborhood into one of the most sought-after destinations for visitors and residents, a trend developers say is unprecedented in the city's history.
"People are realizing how central Southwest is," CityPartners Managing Member Geoffrey Griffis said. "It's kind of the neighborhood that nobody went to, and now people are realizing there are reasons to go there." Griffis, who will speak Nov. 8 at Bisnow's Southwest D.C. and Buzzard Point event, is developing a mixed-use project at 555 E St. SW that will feature a hotel and apartment building. The developer in September 2017 signed European hotel brand CitizenM as the flag for the 252-room hotel. The 196-unit apartment building will consist of 30% senior affordable units, and the project is expected to deliver in Q3 2020. CityPartners also developed the Hyatt Place hotel at 400 E St. SW in 2014. While The Wharf introduced three hotels to the neighborhood, Griffis sees it as a boost for his project rather than competition. "There was some trepidation from other business owners and hotel owners when The Wharf was opening, but I've always held the idea that it's not zero sum," said Griffis, whose company was also a partner on The Wharf development. "The Wharf is driving people into Southwest, but there are other additional reasons to be in Southwest, so it's all growing together. We're creating demand and growing business."
Donohoe Hospitality is leading the development of the Cambria Hotel & Suites at 1535 Half St. SW on Buzzard Point after acquiring the site this summer. The developer has been building hotels in Southwest D.C. since 1980, when it delivered the Holiday Inn at 550 C St. SW, and it also developed a Residence Inn at 333 E St. SW. Donohoe Hospitality President Thomas Penny said employees at the Holiday Inn used to say "welcome to beautiful Southwest," as a way to counteract negative perceptions of the area, but he said it has now changed dramatically. "We used to try to get folks to come to Southwest and it was a challenge," Penny said. "It's gone from the point where it was perceived to be an inferior part of town to now an international destination for entertainment, for lodging, for restaurants, with an activated waterfront experience and sports." The Cambria site is just two blocks from where Audi Field, D.C. United's new soccer stadium, opened in July. Penny said he sees the new stadium as a demand-generator for the hotel, but he said visitors coming to do business with the federal government will still represent a much larger portion of its customers. The growth of D.C.'s waterfront area, from The Wharf to Audi Field, Nationals Park and the Yards, has had a significant impact on hotel performance in Southwest D.C., Penny said. "Historically, Southwest D.C. hotels have gotten inferior rates to Northwest," Penny said. "With the water being activated, with the sports and entertainment, now Southwest is being positioned to either be on par with other parts of the city, and possibly at certain times demand a premium. It's the first time in the city's history that's been possible." Penny thinks last year's opening of The Wharf was a monumental turning point in bringing visitors to the Southwest neighborhood. "The Wharf has been the economic anchor," Penny said. "The Wharf has created local energy and excitement. It has also created excitement for tourists in a way I don't think one development project has generated that level of enthusiasm in 30 years." Developers also see The Wharf as a boost to Southwest D.C.'s apartment market. The Southwest, Capitol Riverfront and Capitol Hill submarket has the fastest-growing apartment supply of any area in the city, according to Delta Associates, but it has been able to dominate the city's absorption and raise rents more than any other neighborhood. "Of course The Wharf is driving demand, which will then drive rental rates," Griffis said. "I think the delivery of units to Southwest are going to be easily absorbed, and even with a tempering of overall District absorption, I think Southwest is still going to command a larger share than the rest of the areas."
Over on South Capitol Street, the dividing line between Southwest and Southeast D.C., Ruben Cos. is constructing a second apartment building after delivering One Hill South last year. The 300-unit project at 950 South Capitol St. SE is expected to deliver in 18 to 20 months, Ruben Cos. CEO Richard Ruben said. Ruben also owns sites across the street at 1100 and 1101 South Capitol St. SW that he plans for future development of either office or multifamily, depending on market conditions. The developer began acquiring the parcels in 2004 as he saw the neighborhood as the next logical extension of the city's growth. He sees anchors such as Nationals Park, Audi Field and The Wharf as demand-drivers for apartments in the neighborhood, but he said they were not the only reason for the area's growth. "The baseball and soccer stadium have clearly helped the neighborhood, but it would have developed even without drivers," Ruben said. "There's only a certain number of places in D.C. where there's enough developable land where you can create a neighborhood. The District is expanding, and this was a logical place to expand to. That's why I bought so much land." He does not see the massive surge of apartment supply as a challenge for developers in the neighborhood, instead he thinks it is helping drive demand by making the waterfront area a more attractive place to live. "In some sense, supply has been our friend, not our enemy, because it brings a critical mass of people and retail," Ruben said. "Without supply and other residents, there's no neighborhood. The continued supply is getting absorbed and will continue to get absorbed. It sort of feeds off itself."
In Southwest D.C.'s The Portals mixed-use complex, Republic Properties is constructing a 373-unit apartment building that will deliver next summer. Designed by Robert A.M. Stern Architects with WDG Architecture as the architect of record, the 14-story building offers views of the National Mall, the Northern Virginia skyline and The Wharf. Republic Properties Vice President Holly Hull said she views The Wharf as a complementary offering to 1331 that will allow residents to take advantage of the new amenities without living on top of the crowded waterfront area. "The proximity to The Wharf and all that brings in terms of programming and retail mix and entertainment and restaurants, it's drawing a lot of people to Southwest that might have otherwise not considered it," Hull said. "It's becoming a vibrant market where people want to be."