A decade ago, the condominium market was hot, hot, hot. Developers couldn’t throw them up fast enough to meet the thundering demand. But as the housing market began to overheat on the eve of the Great Recession, the condo market became saturated, and, as was experienced right here in Falls Church, new multi-unit residential properties that were approved and initially financed for high-end condos had to do a reset and convert to rentals. A third major new project was poised to do likewise, but chose not to and eventually sold out its condos.
Now, just when everybody is convinced that rental apartments are the way to go, behold, the word comes that there is now a glut in Northern Virginia and the wider D.C. area due both to overbuilding and to the slower economy here resulting from the effects of last year’s sequester and government shut down. Rental residential properties are hot, hot, hot in other parts of the country, and this is one of the new regions where they’re not.
Could this effect some of the projects that have already been approved for Falls Church? We have to watch carefully to see, especially in cases where the deals have yet to be formally closed. City officials have to proceed with caution and not push developers too hard for proffers and concessions, because shrinking projected margins of profitability might become too thin to secure financing. There may need to be the exercise of some real, pro-active sensitivity and flexibility short of a developer simply announcing, all of a sudden, that all their plans are off.
So, what is the long-term, sustainable solution for housing development? What is the next wave to jump ahead of? As always, there will be a market for the wealthy, whether in single family homes or empty-nest luxury condos. That’s why, from strictly a revenue-maximization standpoint, we recommend for the now-City-owned land adjacent the West Falls Church Metro a mixed use structure that could readily be the tallest building in the commonwealth. It could be a combination high-rise hotel and luxury condos, irresistible by its location on top of a Metro station. It could also house headquarters for a lucrative high-tech firm desiring a major advantage of being able to move around the region from an intersection of a Metro stop, interstate highway and the Beltway, midway between two major international airports.
But that’s an exception based on a unique location. The longer view for residential has to be seen in the new push that merges housing needs with affordable housing needs. Highly dense residential unit buildings can readily built with small units to be filled with lower income families, corresponding to the new demographic demands in this region. The desire for new development and need for affordable housing are merged in this concept, and not at odds with each other as when affordable housing is a required financial drag on the profitability of a project.