Like a suburban string of pearls. (Delta Associates)

Is Wisconsin Avenue a "Corridor"? Not yet, in the sense of having nodes of walkable residential town centers strung together by fairly continuous commercial development. Few office tenants would think of White Flint, Maryland as a viable alternative to Bethesda or Chevy Chase, which are favored by retail, restaurants, proximity to D.C., nice public spaces, and lots of high-quality housing stock.

Delta Associates, the folks who bring you detailed reports every quarter on the area's economic fortunes, think all that will change with the redevelopment of the White Flint. The whole point of the town's award-winning sector plan is to create more of a "there" there, but Delta takes a more linear view in a new white paper, forecasting White Flint's future relative to its wealthy neighbors to the south.

As a model, the analysts hold up the development of Arlington County's Rosslyn-Ballston Corridor–or the RBC, to friends–which spread from Rosslyn to Clarendon to Ballston as residential and commercial capacity equalized. It's now seen as a single submarket, rather than isolated centers. The report doesn't actually articulate why this is a good thing, beyond the obvious advantage to further out towns of being seen as one with more developed and prestigious locales. It just means we may be speaking of the CCBWFC in 10 years, if all goes according to plan.

Of course, we know there's a big difference between what District residents earn, vs. folks in the suburbs. That also holds true with retail square footage: While the metro area has 26.4 square feet of shopping centers per capita (compared 23.3 square feet nationwide), D.C. proper has a paltry 8.6. Nevertheless, the graph below shows that Washingtonians have considerably higher consumer confidence, compared to their wealthier suburban brethren. Could that be that living in cities makes people happier and more optimistic? I'd like to think so!

On the way back down. (Delta Associates)

Delta Associates is out with its 3rd Quarter Housing Outlook, and trends are mixed: Home prices and months of inventory are up, while sales volume has declined. But one of the more interesting stats, long term, is days on market. By this metric, the D.C. area is doing fantastic. Houses now spend an average of 61 days up for sale before getting bought, which is down 42 percent from the early 2008 peak of 104 days on market. It's also well below the long-term average of 76 days (but still above the all-time low of 29 days). And can you imagine that in 1996 it took 176 days to sell a house? The internet probably had something to do with that one.

The lingering for-sale housing downturn is readjusting the renter vs. owner ratio back toward historical norms—perhaps even overshooting the norm during this recession. Over the past two years, the percentage of renter vs. owners in the Washington metro area has grown at twice the national average.

Crazy! That makes us the "best performing apartment market in the nation." Thankyou, transient federal workforce.

Vacancy rates have actually increased a little bit over the last year, from 2.2 percent to 3.6 percent (though it's not even across the District: the lowest rate is 2.2 percent, in Columbia Heights/Shaw, and highest in Capitol Hill East, at 6.6 percent). But that's because we're actually building new apartments at the same time, not because people are leaving. And those units are commanding higher rents, up 7.1 percent over last year. What's more, lots of projects are scheduled for delivery in 2012, putting the 36-month pipeline at 5,079 units. Will construction move fast enough to keep rents from rising even higher?

(Delta Associates)

Condo market:

• New unit sales were up 62 percent over the last year.
• Condo sales prices sank 6.0 percent over the whole metro area, but went up 1.3 percent in the District.
• 4,624 unsold units are actively being marketed in the metro area–the lowest level since 2003.
• The average purchase price per square foot in the District is $465–$550 in the Central area, $435 in Mideast, $595 in upper northwest, $385 in Capitol East (see map at right).

Office market:

• The overall office vacancy rate is 12.8 percent, up from 12.1 percent a year ago, and projected to continue rising.
• There's 4.6 million square feet in the pipeline, compared to 10.5 million a year ago.
• The pre-lease rate for square footage in the pipeline is 51 percent, up from 32 percent last year.
• Rents were down 4.2 percent during 1st half of 2010.
• Housing prices were up 11.7 percent in the last year.

Apartments:

• The report projects "widespread shortages in late 2011 into early 2012."
• The vacancy rate for investment-grade apartments is 3.1 percent, down from 4.3 percent a year ago. The national rate at 8.2 percent, making D.C. the lowest in the country.
• Rents went up 3.6 percent over the last 12 months.
• The pipeline is 17,309, down from a high of 36,951 units in December 2007.
• Construction starts are still slow, at about 900 units breaking ground in each of the the first and second quarters, less than half the long-term average.

Presumably those bars will start getting bigger soon.

But one graph in particular caught my eye: The amount of retail space in “Grocery-anchored shopping centers”—which typically take the form of strip malls—divided up between D.C., suburban Maryland, and northern Virginia. The District has only a tiny slice of it, which makes sense; we don’t have as much room for sprawling retail complexes with acres of parking. That’s a good thing for people who love urban living: D.C. consumers might not have the convenience of one-stop shopping, but they do have grocery stores that are nested in and actually help build neighborhoods, rather than remote destinations that suck the life out of a community.

David Mayhood highlighted the importance of grocery stores to neighborhood development at yesterday’s Downtown BID panel. CityVista’s Safeway has been hugely helpful in anchoring the nascent NoMa community, for example, and H Street is on its way with a new Giant.

“The consumer really follows the shopping cart,” Mayhood said. “When the grocery store happens, it just explodes.”

A design rendering for "The Axiom," a long-stalled project now underway again.

According to Delta Associates' latest condo report, sales were up 34 percent in the Washington D.C. area in 2009. After years of buyers imagining the region as an abyss of empty condo buildings, this news could change people's mentality. The well isn't entirely dry, but you can begin to glimpse the bottom. The Washington Business Journal reports that last year's sales have moved "the pace it would take to deplete the current supply of condos for sale down to 2.6 years compared to 5.9 years at the end of 2008." Here's more from the Business Journal:

Arlington and Alexandria will likely be the first areas to see a pipeline shortage and, thus, a rise in prices with just a 1.4-year supply of new units. D.C. has a 1.8-year supply...Suburban Maryland, however, has not fared so well. Prince George’s had a 22-year inventory-to-sale ratio at the end of 2009.

The news shouldn't come as too big of a surprise. There's been very little new condo construction to add to the supply in the last year or so. (Though, it's starting to pick up!) Plus, the 2009 homebuyer credit, which expired in late November, was targeted entirely to first-time buyers in relatively low income brackets–for example, couples collectively making over $150,000 could not partake.  This group was able to drain the region's inventory considerably. In Washington D.C., there were 524 sales in 2009; In Arlington, 439 sales; And in Alexandria, 273 sales.

Image by Bonstra Haresign

A recent study by Delta Associates already declared that the Washington D.C. area's recession ended in early 2009. That's when we hit our bottom, and after, we started our slow ascent, adding 40,400 new jobs since late January.

Now, the Greater Washington Board of Trade is reporting that 59 percent of regional business executives believe the D.C. area's economic conditions will improve over the next six months, while six percent expect conditions to decline and 35 percent expect everything to remain the same.

On the job front, only 12 percent of executives believe they will cut jobs, while 32 percent expect jobs to increase and 35 percent say they'll remain the same. And 55 percent of executives believe sales and revenues will improve in 2010 while 12 percent believe they'll decrease.

Image by star5112, Flickr Creative Commons Attribution License

Perhaps the first-time homebuyers credit—which was set to expire by Nov. 30, but now is being extended—has been good to D.C.'s condo market. It looks like for-sale condos are being snapped up around the city.

Last week, we heard that Union Row, the mammoth 14th Street complex with some 270 units, was nearly sold out. This week, McWilliams|Ballard announced that Ten Ten Mass, located near Mount Vernon Square, had finally unloaded the last of its 163 condos.

Yes, both buildings have been on the market for several years. Ten Ten Mass first began sales in 2005, before the building had completed construction. Union Row completed construction in 2007, and began pre-sales in late 2005.  But sales have been moving at a speedy pace recently—or at least they were according to the last numbers I saw.* A recent Delta Associates report noted that condo prices will probably start to rise in the District and the Arlington/Alexandria areas given the current number of units for sale.

*MRIS stats show that condo/coop sales in D.C. (between $100,000 and $5 million) dropped off slightly between August 2009 and September 2009, with 296 and 274 sales respectively. But that sales were up significantly between September 2009 and September 2008, which reported 194 sales.

Delta Associates third quarter condo report was released yesterday, and the numbers look good—well, better than usual—for the District. I did not spot the term "condo glut" once. In the last few months, several projects were cancelled and a few were "reprogrammed," but Delta expects that demand will rise again soon here and across the river in Arlington and Alexandria. As we reported during the last go-round, it looks like prices won't be falling too much more.

• In the last year, condo prices dropped three percent in the District, compared to six percent in the entire metropolitan area.

• The report suggests that condo prices will probably start to rise in the District and the Arlington/Alexandria areas given the current number of units for sale. ("History tells us that at 2 to 2.5 years of inventory and below,prices tend to move up smartly. Currently, Arlington County & the City of Alexandria and the District have the lowest inventory-to-sales ratios in the metro area. Prices declined the least during the past twelve months in these two submarkets.")

• Price increases may lead to new developments in "select submarkets," likely D.C. and Arlington/Alexandria. The report suggests that in the next 12 to 18 months, "we may see a trend of apartment projects switching to condos in select submarkets due to a tightened condo pipeline and increased demand." And a waves of new developments may start rippling through high-demand areas in 2011.