Contesting a Stadium's Power
Monday, February 20, 2006
As the dust settles on the District's deal with Major League Baseball to spend more than $600 million to build a stadium in Near Southeast, one thing seems pretty clear: The prices developers have paid for abandoned lots, rundown warehouses and industrial sites around the proposed stadium have spiked dramatically in the year and a half since news arrived that the Nationals were coming to Washington.
Though planners, real estate brokers and developers agree that the figures are striking, they are still debating how much of those rising prices were set off by the stadium deal, which still needs final approval by Major League Baseball, and how much by other forces of supply and demand.
Ronald Cohen, a developer best known for building big-box stores on Rockville Pike, recently paid $51.6 million for a block at First and K streets SE where nightclubs, auto repair shops and a closed soup kitchen sit.
"Ground is being purchased and buildings are being built based on where the new stadium is going," said Cohen, who plans to start construction soon on a mixed-use development and eventually build close to 1 million square feet on his block, just a short walk from the stadium.
"Clearly all of these sales weren't taking place before. That's because a prudent investor doesn't go on rumor," Cohen said. "Now that the stadium is a go, it's giving focus and attention to this area of Washington. It will give it an identity."
Arthur B. Benjamin, a senior vice president at AMR Commercial Real Estate in Bethesda who is involved land sales in the area, takes a somewhat different view.
"The prices of land in Near Southeast are so high because the city has said they want vibrant development to happen there and [through zoning they've allowed more density there] so that makes it more valuable," he said. "Plus, it's getting to a point where there's less ground left [in the District], and that's pushing the price up."
The local real estate market is being fueled by steady job growth, mainly from the federal government and contractors. That is pushing developers to look for the next hot spot where they can build. With much of downtown built out and the few spots that remain selling for an estimated $200 per buildable square foot, Near Southeast is particularly attractive.
From January 2000 to September 2004, some $40 million worth of land was sold in Near Southeast and nearby Buzzards Point. Then came news of a baseball team and talk of a stadium. More land started trading hands, and the dollar value soared. Since September 2004, almost $220 million in deals has been done.
Commercially zoned land in Near Southeast is now going for $50 to $80 per buildable square foot -- far more than the roughly $20 a foot developers were paying just four to five years ago, land brokers said. And it rivals the prices being paid for land in amenity-laden downtown Bethesda.
A lot slightly bigger than a tennis court at the corner of South Capitol and M streets SE sold last year for an eye-popping $4.5 million -- roughly $80 per buildable square foot. A lot near Half and N streets SE is under contract to sell for $1.3 million, or $109 per buildable square foot. The property has about the same square footage as a three-bedroom Capitol Hill rowhouse.
Both lots are on the blocks abutting the north entrance to the stadium, where developer Monument Realty LLC plans to build a major mixed-use project. The company is better known for developing office buildings downtown but in the past few years has spent about $50 million buying land in Near Southeast, making it the largest private landowner in the area.