With plenty of two-income highly educated families, the D.C. region already has a reputation as one of the most affluent in the country. But the area is fast emerging as a home to the truly rich as well.
High-end luxury retailers are responding. Brands such as Aston Martin are expanding their operations into the area — betting, for instance, that there will be plenty of customers who can afford the $280,000 sports car James Bond drives in the movies. Nearby in Tysons, a Saint Laurent store and the high-end electric car maker Tesla are also set to open their doors.
The region’s top one percent of households make more than a half million dollars yearly — far more than the national average for the one percent, according to a study of Census data by Sentier Research, an Annapolis-based data analysis firm.
And these top earners — many of whom are from dual-income households and benefit from federal contracting — weathered the recession better than their counterparts in some other metropolitan areas and the nation. More are moving beyond comfortable affluence to a much higher standard of living.
“What is unique to D.C. is that there has been a change in the complexion of wealth here. There didn’t used to be much of this ultra-high-net-worth business here and now there is,” said Susan Traver, the regional president of BNY Mellon Wealth Management.
The firm expanded its operations and opened a new office downtown late last year to capitalize on what it refers to as one of the top-10 wealth markets in the country. Since then, the firm has added more than two dozen clients whose assets range from $10 to $50 million on average, Traver said.
The firm works with real estate developers, heirs and small business owners who have sold their companies, some of whom are worth as much as $100 million, she said.
Data on assets can be difficult to come by at the metropolitan level because the sample sizes are so small, experts say. But wealth managers such as Traver point to industry research, for example, Capgemini’s Metro Wealth Index, which recently estimated that the number of high-net-worth residents in the region has grown from 127,000 to 166,000 since 2008, a 30 percent increase. They define “high net worth” as investable assets of more than $1 million, excluding the value of a primary home and collectibles.
Milton Pedraza, the CEO of the Luxury Institute, a research and consulting firm, said that purveyors of luxury goods are drawn to the area because it has a “critical mass” of affluent and highly educated consumers and a stable economy bolstered by the federal government.
Government contracting, where some local entrepreneurs and business owners amassed their fortunes, has been a key driver of the region’s economy for three decades. A third of the region’s gross regional product still comes from federal spending — although that is slowing somewhat.
“Let’s face it . . . the only place with money during the recession was Washington, D.C.,” Pedraza said. “So it’s no surprise that it’s being seen as one of the hubs of luxury where companies want to plant some flags.”
In the upscale Tysons Galleria, labels such as Gucci, Henri Bendel and Tory Burch have moved in within the last two years. And Neiman Marcus has opened boutiques within its store with Van Cleef & Arpels jewelry and made-to-measure $6,000 Tom Ford suits.
Earlier this year, a group of six local millionaires who love Aston Martins ponied up about $2 million of their own money to finance a $7 million deal to acquire the local franchise that sells the bespoke English sports cars, which range in price from $130,000 to $310,000.
The six had little more than their own deep pockets and a sheaf of demographic information about the region’s rising affluence when they were awarded the franchise, chosen over a half-dozen more experienced automotive firms, the company said.
“It’s unusual and almost unheard-of that enthusiasts would come together and buy a dealership,” said Jesse Toprak, an auto industry analyst with TrueCar.com. “It requires a lot of experience and capital investment and time, so it’s not something to do on the side.”
Already there are 500 Aston Martin owners in the area with the potential for more, said one of the principals, William Shawn, 65, a silver-haired lawyer from Georgetown.
Shawn gathered with about two dozen other owners at a country club in Aldie earlier this month for a drive through Virginia’s horse country.
“People have amazing car collections here, and a lot of them don’t yet include Aston Martin,” Shawn said as he drove his low-slung black Aston Martin Rapide to a rally point. He gunned the engine for fun, and the car shot up the hill.
“We think that’s a great market,” he said.
The varied backgrounds of the owners paint a picture of the types of professions that have transformed the region’s economy from sleepy government town to an international hub for information technology, biotech research and defense and other contracting firms.
Along with Shawn, the other two managing partners are Rudy Casasola, the division president of a large systems integration company, and Jonathan Metcalfe, 49, a financier with Merrill Lynch. They have three silent investors who are a senior hotel executive, a construction company owner and the co-founder of a technology firm.
Most of the buyers and customers who frequent the Tysons Corner showroom have similar backgrounds. (There's even a U.S. senator, but they won’t say who.)
Casasola, 45, comes from relatively modest beginnings in Los Angeles, but he did well as the systems integration business he joined in 1993 grew by leaps and bounds, until it was sold to an equity firm in 2005. He remains president of a division of the Greenbelt company now known as Presidio Inc. that does $2.3 billion in business yearly — about a third from the public sector.
Casasola confesses a bit sheepishly that he didn’t even own an Aston Martin when he was asked to invest in the franchise. He has since purchased one.
“I thought it was a great opportunity. There’s great networking,” Casasola said. “I’ve met more people driving than I do at business functions. It’s very social.”
He says that the partners expect to do well with the business but that their expectations are modest. Sales of Aston Martins in the United States are down 10 percent this year but growing in this area, according to a sales analysis by Edmunds.com. About 1,000 Aston Martins are sold in the United States each year.
The showroom, which opened off Route 7 in April, still has dark markings on its concrete facade from when it was a Lincoln-Mercury dealership, and the travertine floors and coffee bar have yet to be installed. The company already ranks fourth in U.S. sales among 34 dealerships, the company said.
The owners say they are looking forward to the day in early spring when renovations on the showroom — including custom lighting, frameless glass offices and marble floors and walls — are complete. They often joke about moving in recliners and TVs when it’s finished, creating their own little clubhouse.