The economic growth and urban development of the nation’s capital were the focus of ULI Washington’s second annual Future Forum. Held on January 10 at the Johns Hopkins University Bloomberg Center, more than 200 ULI members attended the all-day gathering to hear the insights of industry leaders and participants as they addressed the future of the Metropolitan Washington Region.
In a panel moderated by Dr. Tracy Hadden Loh, a fellow with the Anne T. and Robert M. Bass Center for Transformative Placemaking at Brookings Metro, Richard Lake, managing partner of Roadside Development, and Tom Murphy, former mayor of Pittsburgh, addressed the myriad opportunities—and frustrations—facing greater D.C.’s commercial real estate market.
In her introductory remarks, Loh said a network of strong activity centers linked by transit was key to revitalizing urban centers like D.C. “That is physical proximity,” she said, “not just between workers at the same firm—that’s all jobs of any kind, physically located in the same place.”
Inflection point
During the panel discussion, Lake lauded Murphy, who led the revival of Pittsburgh during his decade as mayor (1994-2006). During that time, Murphy leveraged roughly $4.5 billion to transform more than 1,000 acres of blighted industrial space into new commercial, residential, retail, and public uses, among other projects.
Murphy explained that he was born and raised in Pittsburgh, and like 70 percent of the workforce in the 1970s, his father worked in a steel mill, a career that spanned 51 years. But it didn’t last. By the time Murphy became mayor, the steel industry had all but disappeared and regional population had fallen by 20 percent.
“I’m becoming mayor in 1994, when there were billboards saying the last person out shut the lights off. You want that to be your city slogan?” he asked.
Murphy then offered his blunt assessment of D.C.’s prospects going forward: Washington has been led for 30 years by “spoiled babies” who have resisted change because everything was “going well.”
Reviving a region is “fundamentally not about architecture in fancy places,” Murphy said. “It’s about employment. It’s about where people work, and how do you create those jobs in a very intentional way? You’ve not had to do that here. You’ve not had to think about that.”
“The future of a metropolitan region—whether it’s Pittsburgh or Washington—is not a policy question,” he said. “It’s action. It’s making decisions. It’s leadership that I believe the leadership needs to have face to face. And leadership needs to have curiosity, be nimble, and have an appetite for risk.”
Economic drivers
Murphy said institutes of higher learning are critical and often-overlooked components of urban development. To make his point, he cited Dr. Richard Cyert, who was president of Carnegie Mellon University from 1972 to 1990. Murphy said many people didn’t understand when Cyert said universities could become “economic drivers of this region.”
“We recognized that we needed to completely rebuild our economy from one that was focused on big unions and big corporations to one that would build an entrepreneurial culture,” Murphy said. “That entrepreneurial culture was built within the university first, where they were focused on creating jobs.”
Understanding the strategy also entailed knowing how to build the infrastructure to support such a transition. When he was a member of the Pennsylvania House of Representatives (1979-1993), Murphy said the legislature was able to get the state government to commit 2 percent of its pension fund assets to invest in venture capital (VC), if the VC firm would match the money and open an office in Pennsylvania. The result, Murphy said, was 15 VC firms in Pittsburgh and the Ben Franklin Technology Partners,which provides pre-venture capital for promising startup companies.
“It can’t be one of a lot of different priorities,” Murphy said. “It needs to be focused, and people need to be committed to it every day, and I’m not seeing that commitment in Washington. This is fundamentally about leadership. It’s about a dozen people who want to make a difference who can get together and bring some resources and begin—in a very strategic way—to focus on it.”
The Johns Hopkins real estate team led by Mitch Bonanno was responsible for the light-filled adaptive use from the Newseum to its current use as the Johns Hopkins Bloomberg Center, which houses the School of Advanced International Studies, the Carey Business School, the Krieger School of Arts and Sciences, Peabody Institute, and the newly established School of Government and Policy. (Sibley Fleming/ULI)
Sports as economic driver
Lake of Roadside Development picked up the conversation pointing out that while the D.C. economy has not failed “yet,” the numbers are on a grim trajectory. “We are now spending 39 percent more on our in our budget at D.C. government than we did 10 years ago. We’ve seen our population slide down. We’re spending $20 billion for [fewer than] 730,000 souls—[there] needs to be a million people in the city. So, the reality is, we have to change our thought process, we have to change on how we think about economic development.”
“It took us an enormous amount of time to try to attract retailers to the city,” Lake continued. “We’ve lost 40 percent of the retailers during the last three years in our urban core, [and] the amount of capital that’s going to be necessary to rebuild that is going to be enormous.”
Lake also pointed out that D.C. is potentially losing two major sports teams to a Northern Virginia suburb—a major economic blow for downtown D.C. if it happens. “I don’t believe that our region is healthy if its centers are hollowed out,” Lake said. It would make no sense to tear down the existing stadium to build another on a greenfield site a few miles away, with a Metro station that would need to be doubled in size to accommodate car traffic. “There’s no walkability to it,” Lake said. “There’s no reason for it, and as a region, we can’t afford those mistakes … We can’t afford to show some sense of arrogance that we don’t care anymore.”
Becoming more welcoming
Lake’s iconic D.C. developments include City Ridge, a 1.8 million-square-foot (167,225.5 sq m), mixed-use development located on the historic Fannie Mae campus; and City Market at O, the revitalization of D.C.’s historic O Street Market, with a 1 million-square-foot (92,903.04 sq m), mixed-use development.
But Lake said money for new projects is all but frozen in D.C. “Capital is enormously scared of Washington right now,” Lake explained. For example, he said, the 40-year-old Tenant Opportunity to Purchase Act, a tool to protect long-term residency, “shouldn’t be used to stop someone from buying a brand new $700 million [or] selling a $700 million asset.”
“We do need to protect long-term residency, and there are so many other tools we can be looking at,” Lake adds. “When the law was [put] in place, we didn’t have tax credits. We didn’t have covenants for affordability. We didn’t have all these other tools that we have to protect residents [now].”
Seeking government for funding is also fraught with obstacles. “The problem is government money has a lot of costs and a lot of entanglements, and in D.C., it has even greater entitlements than any other marketplace I’ve ever seen,” Lake said. “It is so challenging here. We’ve had projects delayed by years and lose it, and missing complete economic cycles, because the government couldn’t get out of the way.”
“D.C. actually is unique,” he concluded. “It doesn’t have a state government. It is the council… 13 people you have to convince to make meaningful change. The challenge is those 13 people have never really had to make a difficult decision before. And the reality is, we need them to understand that if we want to achieve their goals… we’re going to have to talk about reality, and we’re going to have to talk about things that really need to change.”
