The in­flux of mil­len­ni­als that made D.C. a hipster haven is com­ing to an end

The Washington Post Sunday - - BUSINESS - BY JONATHAN O’CON­NELL

For much of Amer­ica, it was a long, slow crawl out of the Great Re­ces­sion. Five years ago, auto and steel plants had shut their doors. In­vest­ments had col­lapsed. Fore­clo­sures and un­em­ploy­ment were spik­ing. Yet in D.C., it was boom times. From 2010 to 2011, the Dis­trict gained more than 1,300 res­i­dents a month, most of them young and well ed­u­cated. With a new mayor, a new pres­i­dent and an $800 bil-- na­tional re­cov­ery act, the city and lo­cal de­vel­op­ers had rolled out bike lanes, dog parks, apart­ment build­ings and dozens of restau­rants and side­walk cafes.

Col­lege grad­u­ates poured into neigh­bor­hoods that had suf­fered from dis­in­vest­ment: Shaw, Columbia Heights, NoMa and H Street NE. For a few years, this sleepy gov­ern­ment town was brim­ming with rein­ven­tion.

Now it seems the Dis­trict’s mil­len­nial boom is grind­ing to a halt.

Cen­sus data re­leased last month in­di­cates that the Dis­trict’s in­cred­i­ble growth in young adults, ages 25 to 34, has stalled. Af­ter adding 10,430 peo­ple in that age bracket from 2010 to 2011, the Dis­trict added a net of just 2,662 of them from 2013 to 2014 (the data run midyear to midyear).

Nearby coun­ties, in­clud­ing Ar­ling­ton, Mont­gomery and Fair­fax, have be­come even less at­trac­tive. Each lost more mil­len­ni­als than they added from 2013 to 2014.

The drop-off seemed un­think­able two years ago, when the Dis­lion trict was the No. 1 des­ti­na­tion in the coun­try for mil­len­ni­als. At the time, Forbes mag­a­zine ranked the Dis­trict, longed de­rided as but­toned-up and plod­ding, as the coolest city in Amer­ica.

“Dur­ing that pe­riod, among the large metropoli­tan ar­eas, we had the fastest-grow­ing mil­len­nial pop­u­la­tion in the coun­try,” said Greg Leisch, se­nior man­ag­ing di­rec­tor of mar­ket re­search at New­mark Grubb Knight Frank, a com­mer­cial real es­tate ad­vi­sory

firm. “And the rea­son for it was, all of sud­den, we were a hip place.”

“We were grow­ing so fast in those years, we were en­vied by ev­ery other metropoli­tan area,” said Paul Des-Jardin, di­rec­tor of com­mu­nity plan­ning and ser­vices for the Metropoli­tan Washington Coun­cil of Gov­ern­ments.

The in­flux in young pro­fes­sion­als, who are of­ten light users of public ser­vices, helped the Dis­trict roar out of the re­ces­sion while other ar­eas were still pick­ing up the pieces.

Real es­tate com­pa­nies broke ground on 4,400 new units in the sec­ond half of 2010, morethan five times what they’d be­gun in the same span the year be­fore.

As white-col­lar — and usu­ally white — work­ers flooded in, the ef­fects were eco­nomic, so­cial and cul­tural. Many of the new build­ings fea­tured mi­cro-units and rooftop pools. Restau­ra­teurs pitched gourmet dough­nuts, small plates, $14 cock­tails and “ar­ti­sanal” ver­sions of seem­ingly ev­ery­thing, from ice to toast to dog food.

The ar­rival felt like an in­va­sion to some. As own­ers of new restau­rants near U Street co-opted names from African Amer­i­can history for their high-priced eater­ies, Stephen A. Crockett Jr. wrote on The­Root.com that “there is a cer­tain cul­tural vul­tur­al­ism, an African Amer­i­can his­tor­i­cal ‘swag­ger jack­ing,’ go­ing on on U Street.”

Over­all, the Dis­trict is still gain­ing pop­u­la­tion and was up 1.5 per­cent in 2013-14, to 658,893 res­i­dents. (In 2010, the pop­u­la­tion was 601,723.) And there is some good news on the job front; while the Dis­trict has been los­ing fed­eral jobs, it added pri­vate-sec­tor jobs in each of the last four years, for a to­tal gain of 54,500. The re­gion added 62,000 jobs in the 12 months that ended in April, well above av­er­age.

But some of the com­pa­nies and in­dus­try lead­ers who en­joyed the boom are now ex­pect­ing slower or flat eco­nom­ics in the com­ing year or two.

One of the most ag­gres­sive apart­ment builders in re­cent years, MRP Realty, sur­prised in­dus­try in­sid­ers and its own ex­ec­u­tives when it leased nearly its en- new 400-unit NoMa build­ing, El­e­va­tion at Washington Gate­way, in less than a year.

“To say we were sur­prised would be an un­der­state­ment when we hit 95 per­cent [leased] in 11 months,” said Robert J. Mur­phy, MRP man­ag­ing prin­ci­pal.

The­com­pany is leas­ing twoother projects in the area, in Po­tomac Yard and Hunt­ing­ton, and Mur­phy said units are be­ing snapped up quickly there as well.

But he said that with build­ing now out­pac­ing de­mo­graph­ics in some neigh­bor­hoods, his com­pany has be­gun un­der­writ­ing fu­ture to ex­pect no rent growth be­yond what units are get­ting to­day. MRP has also be­gun in­vest­ing in cities where mil­len­ni­als are no war­riv­ing more quickly, such as Philadelphia.

“Af­ter 2016, things will slow down a bit,” Mur­phy said.

The Dis­trict added more than 200 restau­rants in 2014 alone, a pace that is also likely to wane, said Kathy E. Hollinger, pres­i­dent and chief ex­ec­u­tive of the Res­tau­rant As­so­ci­a­tion of Metropoli­tan Washington.

She said some res­tau­rant own­ers are now more fo­cused on mak­tire ing sure their com­pa­nies are sus­tain­able.

“In the last two years, we’ve prob­a­bly seen 300-some new restau­rants in D.C. alone. Which is a lot,” Hollinger said. “You’re also look­ing at 14th Street and other places be­ing fully de­vel­oped. Still, I do not think we have reached our sat­u­ra­tion point, and I think ’15 is go­ing to be just shy of what opened in ’14. So I think maybe in ’16 things will flat­ten out a lit­tle bit.”

There are dif­fer­ing views on why the boom in young ar­rivals has waned. One is the cuts to fed­eral jobs and spend­ing. The Dis­trict lost 11,800 public-sec­tor jobs in the past four years, ac­cord­ing to its chief fi­nan­cial of­fi­cer. In just a three-year pe­riod from 2010 to 2012, Vir­ginia ex­pe­ri­enced $9.8 bil­lion in de­fense cuts, which means fewer jobs for peo­ple who might live and shop in the Dis­trict.

When the Dis­trict added jobs, they were of­ten po­si­tions suited for fresh-out-of-col­lege ar­rivals, in ho­tels, re­tail, restau­rants or apart­ment build­ings. “We were adding jobs in hos­pi­tal­ity,” Des Jardin said. “We weren’t adding the man­age­ment, con­sult­ing, the engi­neers, IT — what we pride our­selves on hav­ing.”

But the new­est data shows that de­spite the slow­down in mil­lenni-projects al ar­rivals, older work­ers — those be­tween 35 and 44 — are find­ing more op­por­tu­ni­ties in the bread-and-but­ter in­dus­tries that have made up the area’s econ­omy his­tor­i­cally. That age group has grown at least 3 per­cent in each of the past four years in the Dis­trict, a much more steady tra­jec­tory than for mil­len­nial growth.

“The kind of jobs that we are grow­ing are not nec­es­sar­ily filled by mil­len­ni­als — they are pro­fes­sional, busi­ness ser­vices,” Leisch said.

Slightly older work­ers are also now rent­ing the new apart­ments. At MRP’s El­e­va­tion build­ing, there are 135 renters ages 30 to 39, 120 who are 25 to 29, and 55 who are 21 to 24, ac­cord­ing to a sur­vey the com­pany is­sued.

Look­ing at the cen­sus num­bers, D.C. Plan­ning Di­rec­tor Eric Shaw said he was “ex­cited by the fact that peo­ple are re­main­ing here.”

“We need to have a wide range of hous­ing choices. So it’s not just the mi­cro-units,” he said. “Peo­ple are de­cid­ing to re­main here for longer as they find a part­ner, add a dog, start a fam­ily. They are find­ing the neigh­bor­hood where they want to be.”

“The kind of jobs that we are grow­ing are not nec­es­sar­ily filled by mil­len­ni­als — they are pro­fes­sional, busi­ness ser­vices.”

Greg Leisch, se­nior man­ag­ing di­rec­tor of mar­ket re­search at New­mark Grubb Knight Frank, on how the eco­nomic scene in the Dis­trict is chang­ing,

DIXIE D. VEREEN FOR THE WASHINGTON POST

Above from left, Kun­nada Pankong, KanokonMongkhonkit­tha­worn, Thaw­ipornWeeraset­siri and Yun­y­ong Loylip at Oki Bowl DC, which opened last fall on the edge of the Dupont Cir­cle area. Be­low, NPR’s head­quar­ters in NoMa, an area that ben­e­fited from mil­len­nial in­flux.

EVY MAGES FOR THE WASHINGTON POST

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