Development Slowing Down In Shaw, Columbia Heights Despite D.C.'s Highest Rents

Some of D.C.'s most desirable neighborhoods are quickly running out of space for new housing.

The Shaw-Columbia Heights submarket commands the highest asking rent per square foot in the District, according to Delta Associates' Q1 2022 report, but it has the smallest development pipeline.

The circumstances that allowed the areas of Shaw, Logan Circle and 14th Street to develop in the late aughts through the 2010s, including access to the newly expanded Green Line and the rise of arts and entertainment venues, have long been a draw for young renters looking for relatively small units.

Even though rents there dipped in the early days of the pandemic, those young renters have come roaring back — rents in Shaw were up 29% year-over-year in Q4 2021, according to the Washington, D.C. Economic Partnership, and rents around Dupont and Logan Circles rose 33.2%. 

But that rent growth, and the District's lowest vacancy rate, haven't led to a surge in development: Shaw-Columbia Heights has just 661 units in its pipeline over the next three years, according to Delta Associates, the lowest of any submarket studied in its most recent report. That’s compared to 5,556 in NoMa-H Street and 4,567 in the Capitol Hill-Riverfront-Southwest submarket.

"The development pipeline has shrunk,” Delta Associates President Will Rich said. “So there aren't as many opportunities, especially along the main commercial corridor in that submarket, which is 14th Street, but also near the Shaw Metro and in Columbia Heights. There's not as much opportunities to build large-scale Class-A apartments at the moment."

Today, most of the existing projects around Shaw are smaller in scale. Four projects surpass 100 units in Shaw: High Street Residential's 230-unit development at Seventh and P streets, MidCity Development's 316-unit project at the 1700 block of Eighth Street, a 360-unit project from MidCity on the 1200 block of Fifth Street and the Parcel 42 development from Dantes Partners.

WDCEP's 2022 development report found submarkets like the Union Market District and Capitol Riverfront were responsible for bringing thousands of units in major projects online last year. But as development sites around Shaw dry up, those large-scale developments, and all the new amenities they offer, may soon be vying for a place atop the asking price scoreboard.

"Residents tend to shop around in different neighborhoods, they don't stick to one neighborhood when looking for an apartment," Rich said. "So while competition from within the market won't be as robust as the area becomes more mature, the area will still compete with other parts of the city that have a growing amenity base.”

Buwa Binitie, managing partner of Dantes Partners, says even as the number of larger sites dwindles, there is still opportunity to add housing in and around Shaw. The developer has multiple projects in the neighborhood, including the Amazon-backed Parcel 42 project and a multifamily joint development project with Roadside Development at Eighth and O streets.

Binitie said the neighborhood's political leaders have been supportive of development projects with a strong retail mix, and he's searched for new opportunities even as some of the more obvious sites get snapped up.

"They have really cultivated a culture of creating a good mix of having development, having that density being an attractive place for retailers," Binitie said. "What's not to like as far as Shaw is concerned, right?"

Among Class-A apartments, Shaw has commanded the highest rents for most of the last several years, Rich said. But during the pandemic, renters flocked to larger units in Upper Northwest, pushing the submarket to briefly surpass Shaw-Columbia Heights. 

Rich said the average unit size and the total number of units for projects in the Shaw submarket were smaller than some of its competing submarkets, in part because developers seek to maximize rent revenue. The submarket's smaller units are partially responsible for its place atop D.C.'s rankings because a studio or one-bedroom can command higher prices per square foot than two- or three-bedrooms on average, Rich said. 

"Typically studio apartments have the highest price per square foot, because as you increase the size of the unit, it doesn't necessarily correlate with the rent going up at the same rate," Rich said. "In that particular part of the city ... the neighborhood is the selling point, not necessarily the size of your apartment."

There are new opportunities for eager developers to chase, however. One site on the market is receiving strong attention thanks in part to the lack of development opportunities.

Shiloh Baptist Church is selling two properties on the same block of Ninth Street to finance its own programs and the properties have already received multiple offers since going on the market, said Ernie Jarvis, managing principal of Jarvis Commercial Real Estate.

Jarvis, who is responsible for marketing the properties, said multifamily would be the "highest and best use"  for the properties, given their proximity to amenities and the demand for rentable units in general in the neighborhood. 

"There is a good amount of interest as infill development sites are becoming increasingly difficult to find," Jarvis wrote in an email.

For his part, Binitie said he’s looking for projects in whatever form he can take them.

“There's still a couple of pockets, there's still a couple of sites, that may not be prominent, easily identifiable, but I'm aware of [them],” Binitie said. “There's just nothing to complain about, and that's why I hope that the tradition continues in such a way that all the development projects are able to move along in Shaw.”