A couple years ago, the Washington area became such an attractive market for new apartments that landowners found themselves in a rush to build as many new units as possible.
That includes Douglas Development, a company known for its patience.
Founded by Douglas Jemal, and now largely operated by his son Norman, Douglas Development is a private D.C. firm that has amassed a portfolio of properties totaling 8 million square feet, from Richmond to Annapolis. The Jemals are happy to acquire property — vacant lots, warehouses, rowhouses — and sit on it as long as they feel necessary, sometimes to the point of falling behind on property taxes and taking out unconventional loans.
But when the rosy apartment conditions — considered by some to be the most favorable in the country — presented themselves, the Jemals jumped in with both feet. Now they are one of the most aggressive players in a market that some forecasters say could cool considerably by the time some of their buildings are completed.
The Jemals began by bringing in partners with apartment experience on two projects with more than 300 units near Mount Vernon Square. Along with CAS Riegler, the family is working on a 70-unit building at 1250 9th Street NW, and it created a joint venture with apartment giant Kettler on 450 K St. NW, a 233-unit building currently under construction.
Since then, the Jemals have been going it on their own, hiring staff with apartment experience, doing market surveys and taking a personal interest in the units they build, from floor layouts to windows and countertops.
In coming weeks, the company plans to tear out a used auto dealership at the corner of 14th Street NW and Florida Avenue NW and build 30 apartments with ground floor retail.
On Wisconsin Avenue NW, after a contentious zoning battle, Douglas Development won approval for a 60-unit residential building, The Bond at Tenley, that will have two levels of retail but no underground parking — saving the company millions after paying a price some thought was too high.
And Douglas has nearly completed 39 unorthodox units in the dome of the former Citadel roller skating rink in Adams Morgan. Harris Teeter opened on the ground floor in 2008, and Douglas had tried to persuade office users to occupy the dome above, to no avail. Instead, it built apartments, some of which do not have windows, but which he said have 35-foot ceilings.
“To be honest with you, it came out of the fact that after a lot of attempts we were unable to make office space work in that space under the dome,” Jemal said. But he said the building’s design and the market were strong enough that even the windowless apartments would attract interest. “A lot of people see that and say ‘I’d never live in a unit like that.’ And then when people tour there, they find that they’re the coolest units,’” he said.
Douglas Development is not the only company to transition to apartments. Federal Realty Investment Trust, a publicly traded retail specialist, is building its own apartments in White Flint. Hines, a major office builder, has begun building apartments in some markets, and in February purchased the 458 apartments under construction at CityCenterDC.
The question now for companies with apartments on the way in the Washington area is whether there are too many units in the pipeline. More than 31,000 apartments are expected to be completed in the region in the next three years, according to Alexandria-based research firm Delta Associates. Projects in parts of Montgomery and Fairfax counties have not kicked off as quickly as planned.
“In general, the market can sustain it,” said William S. Roohan, vice chairman at the services firm CBRE. “We do have job growth. Sequestration is really not going to have the impact that at the end of the day everybody thinks it’s going to have.”
Job growth aside, Roohan said there are still young prospective renters living with their parents and empty nesters looking to downsize. Some projects in saturated neighborhoods may not hit rent targets, but he said he expects nothing resembling gluts in Atlanta, Dallas or Miami. Two years ago, Washington’s apartment market “was like a Maserati driving 120 miles an hour.”
“Now we have a nice Buick driving 72 miles an hour,” he said. “You can make a lot of money doing that.”
Jemal said he’s not slowing down. Douglas Development is planning more than 1,000 additional units, he said, including some in Richmond. He said the longer the apartment boom lasts, the better, because Douglas Development was not constituted to sell dozens of individual condominium units. “We’re really not that transactional. So the condo business is not a business I see us really playing in,” he said.
Norman Jemal, 44, echoed his father, who started out in retail and electronics, in saying the future of the city looks bright, even if the development field is more crowded. “As long as I can remember, this city has been getting better. It’s better than it was five years ago, 10 years ago, 15 years ago, 20 years ago. I don’t expect that to change.”