The news that Bloomingdale’s will close its store at White Flint says less about the future of the department store or Rockville Pike than it does about enclosed malls. Shoppers no longer prefer them, retailers are abandoning them and developers are scrambling to tear them down or — as is the case of White Flint — turn them into suburban town centers. Even in a rejuvenated Georgetown, the once-elegant Georgetown Park mall sits mostly empty.
The same fate is in store for the suburban office park that, not so many years ago, was the bread and butter of the commercial real estate business in Washington. Workers no longer prefer to work in them, companies no longer want to occupy them, banks no longer will finance them, real estate investment trusts no longer want to own them and planning boards have become reluctant to approve them. In the future, developers say, offices will be part of mixed-used developments, with shops, restaurants, schools, day-care centers and doctors’ offices, preferably within walking or biking distance of condos, townhouses and Metro stops.
Steven Pearlstein is a Pulitzer Prize-winning business and economics columnist at The Washington Post.
Changes in tastes are also conspiring with changing demographics to alter the economics of housing developments, particularly in the outer suburbs.
Across the region, a generation of baby boomers is getting ready to sell three-bedroom suburban colonials to Gen Xers who either don’t want them or can’t afford them. Add to that a wave of foreclosures and excess inventory left over from a speculative housing boom that has driven home prices in many submarkets to levels below the cost of new construction.
For exurban developers, the implication is pretty clear: The raw land they’re holding isn’t worth much and in any case, and there’s not much point trying to build on it until the excess inventory is worked off. Perhaps that is why developments that were started during the boom but were never finished are selling at 35 cents on every dollar invested in land, roads, street lights, sewer and water lines and half-finished golf courses. Even when the market clears, exurban development is likely to focus on low-cost starter homes.
All that contrasts sharply with what is going on in the District and inner suburbs, where prices have held steady and a construction boom is under way for new and remodeled townhouses and apartments. Despite the absence of bank lending, speculative condo developments have even begun to spring up in the hotter neighborhoods, almost all of them equity financed. This market is driven by singles, young-marrieds and empty-nesters, plus a growing number of families with children, all looking for a more urban, less car-dependent lifestyle.
Accommodating this new demand, and these new economics, won’t be easy.
Whereas exurban development was a matter of assembling a few large tracts of farmland or sparsely settled countryside, redevelopment of existing neighborhoods requires dealing with scores of owners of small parcels who may not want to sell, or like things the way they are and will use the political process to keep them that way.