With its vibrant blend of urban centers, historic neighborhoods and flourishing suburban communities, the Mid-Atlantic region has long been a hotspot for multifamily investment and development. Like many parts of the country, the region is currently readjusting to the new economic environment, but most metros are still seeing intense construction activity.
To gain insight into what is driving growth in this region, Multi-Housing News reached out to Ed Chaglassian, executive vice president, head of acquisitions at JBG SMITH Properties, one of the most active real estate investors and developers in the Mid-Atlantic area. Currently operating more than 7,000 units in Maryland, Virginia and Washington, D.C., and with thousands of other units in various stages of development, the company is rapidly expanding its footprint in the Mid-Atlantic. Chaglassian discussed the current opportunities in the historically recession-resilient region and provided details about the firm’s projects in the area.
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How would you describe the Mid-Atlantic multifamily market today, considering the ongoing economic volatility and overall slower transaction activity in most parts of the U.S.?
Chaglassian: The D.C. metro multifamily market has continued to post strong performance despite some modest signs of slowing growth, similar to those observed across the country. JBG SMITH remains largely optimistic about the market from a growth perspective and confident in the future of this historically recession-resilient market.
In addition to the region’s strength, most of our assets are in or near National Landing, which benefits from four powerful demand catalysts—Amazon’s second headquarters, Virginia Tech’s Innovation Campus, the Department of Defense and our digital infrastructure investments—all of which help position our portfolio to withstand a downturn.
The historic resilience of the Washington, D.C., market and the fundamentals of our unique demand drivers offer shelter from the storm. National Landing’s urban-suburban location and the dramatic repositioning of its amenity offerings have enabled us to capture a disproportionate share of market demand. This is a trend that we believe will continue even in the face of a potential recession and will strengthen as residents increasingly demand best-in-class environments.
You have quite a sizeable portfolio in the region. What makes your properties stand out and outperform?
Chaglassian: People are drawn to vibrant, walkable communities and our residential properties are defined by their locations in dynamic amenity-rich, transit-served urban neighborhoods. Our portfolio of more than 7,000 owned and operated multifamily units—98 percent of which are within walking distance of Metro stations—are primarily concentrated in high-growth submarkets in Washington, D.C., Virginia and Maryland.
This includes neighborhoods such as National Landing where JBG SMITH currently has more than 2,800 units and an additional 1,583 under development, as well as significant holdings in D.C.’s Shaw neighborhood and Ballpark District.
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How have occupancy rates fluctuated across your properties in the Mid-Atlantic region in the past couple of years?
Chaglassian: Occupancy rates have remained strong, in lockstep with the numbers observed across the overall D.C. metro market. Our multifamily portfolio ended 2022 at a solid 93.6 percent occupied and 94.5 percent leased, with renewal trends continuing on a bullish trajectory.
Overall market asking rents ended in 2022 three percent ahead of where they were in 2021 and 7.7 percent ahead of 2020. This pattern suggests that, despite some softening occupancies, the market has successfully held onto gains realized over the past two years as reflected within our own portfolio.
Please share some details about recent multifamily acquisitions that you made in the Mid-Atlantic. Do you intend to further expand in the region?
Chaglassian: We remain steadfast in our ongoing, long-term commitment to convert our portfolio to the majority multifamily in the region, which includes both acquiring and developing assets and remain energized by what’s to come.
In terms of acquisitions, we recently invested $181 million across three off-market partner buyouts within our multifamily portfolio. This included acquiring the remaining interests, therefore obtaining the full ownership of Atlantic Plumbing and The Wren in the Shaw neighborhood, in addition to 8001 Woodmont in Bethesda.
JBG SMITH also has two multifamily projects currently under construction. At the beginning of 2022, we broke ground on 2000 and 2001 South Bell Street in National Landing. The two-building development will bring a total of 775 rental apartments and nearly 20,000 square feet of retail to the heart of National Landing upon delivery in 2025.
We also continue to make progress on the 1900 Crystal Drive development that is set to deliver 808 multifamily rental units and approximately 40,000 square feet of street-level retail in 2024.
JBG SMITH also prioritizes creating and preserving much-needed affordable housing for the region through the Washington Housing Initiative’s Impact Pool. The Impact Pool leverages private capital to help combat the scarcity of housing for middle-income families throughout the D.C. region’s most up-and-coming neighborhoods. To date, it has helped create and preserve more than 2,500 units of quality workforce housing.
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Placemaking plays an important role when it comes to your communities and defining neighborhoods. Tell us more about your placemaking efforts.
Chaglassian: JBG SMITH’s ongoing placemaking efforts aim to create meaningful places to connect communities and enhance the experience of those that live, work or visit. In National Landing specifically, where almost 70 percent of our portfolio is located, catalysts including our ongoing placemaking and digital infrastructure investments have set the stage for the area’s ongoing transformation.
We are entering the final stages of construction on Water Park and Dining in the Park, two new outdoor destinations that will transform 1601 Crystal Drive and the courtyard in front of 2121 Crystal Drive with novel culinary experiences set among greenery and a host of activated open spaces. These two projects are central to JBG SMITH’s efforts to transform National Landing into the Capital region’s premier destination.
Over the next 18 months, we anticipate 55 new retailers to be open in National Landing, revitalizing the streetscape. When combined with JBG SMITH’s and Amazon’s other planned retail deliveries in the next few years, the number of street-level retailers will approximately triple in the neighborhood.
As National Landing’s predominant owner, developer and operator, JBG SMITH is uniquely positioned to deliver the world’s first Smart City at scale. We believe our National Landing digital infrastructure initiatives will drive substantial long-term growth. Our plan is to provide the digital infrastructure necessary to shape the future of the industry and to equip innovators with the foundational amenities to revolutionize the way they work and live. Our ubiquitous 5G rollout and other connectivity enhancements are just the beginning and we’re really excited about being a blueprint for how the future of urban communities and mixed-use neighborhoods can come to life.
What makes your developments stand out in terms of design, amenities and overall impact on their respective submarkets?
Chaglassian: Amidst all the uncertainty over the last few years, we have been able to make impressive progress throughout our various developments. JBG SMITH is the development partner for Amazon’s second headquarters and we are on schedule to deliver the first phase, Metropolitan Park, this summer. Met Park will include two 22-story office buildings, over 50,000 square feet of retail, and a more than 2-acre public park for the entire community to enjoy. It has the capacity to welcome up to 14,000 employees.
In Potomac Yard, Virginia Tech is moving full steam ahead with its $1 billion Innovation Campus, which is expected to open on schedule in fall 2024. In February, we were able to celebrate the topping out. The campus is anticipated to graduate 550 master’s and 50 doctoral candidates annually, creating an extremely lucrative tech talent pipeline that will fuel the tech-focused ecosystem we are creating in the neighborhood.
Going forward, how do you anticipate the Mid-Atlantic multifamily market to perform? What are your expectations?
Chaglassian: We are energized by what’s to come and continue to advance our residential development pipeline in alignment with our transition to a majority multifamily portfolio.
Our focus on assets in the region’s most popular residential neighborhoods and on office in National Landing is in harmony with the urban-suburban demand trends we’re observing. We have accelerated our growth pipeline and surpassed the capital recycling targets designated to fund it. We are well-positioned to capitalize on the growth we expect in one of the most unique innovation ecosystems in the country.
