I am often asked these questions: Has the market collapsed? Will downtowns fail? Is street retail over? Is Penn Quarter dead? The answer, emphatically, is no. You might think that a self-serving opinion, being in commercial real estate, but hear me out for 2 minutes.
History is helpful. We have previously been through pandemics, depressions, social unrest, political divide. Urban centers, entertainment, and restaurants did not disappear. In some cases, they faltered, but our need for social interaction, affiliation, and the pursuit of happiness are stronger than their challenges. Yes, some businesses and industries did collapse, others came back stronger. Some sectors are now failing, others are thriving. Large restaurants are struggling and closing, small restaurants are in more demand. Indoor theaters have shuttered, for now, outdoor markets and dining are booming. It is too soon to say how far this will go and how long it will last, but change is constant, and has only been accelerated for the moment. 14th Street was once home to auto dealerships and mechanics, certainly not a place to eat. Georgetown was once a dirty tobacco port, Penn Quarter had fine hat stores but stank of horse urine.
In each case, adaptation prevailed, and new, better uses replaced old ones. Some businesses died. Organically, cells die while the body grows. I do not take these individual failures lightly, these businesses deserve our help. Disruption is difficult, but often leads to innovation. Yesterday's dirty factories are today's loft condos. Empty storefronts will find new purpose. None of this means we should ignore the pain of those caught in the wrong place and time, but nor should we bet against cities, which offer more than I can take up here, but trust Jerry Seinfeld. Following 9/11 terrorist attacks, many thought high rise offices were obsolete, but we move on because we have to. Food halls are on pause, ghost kitchens are sprouting. Le Pain Quotidian filed for bankruptcy, Chipotle is expanding. Office vacancy is rising, so is warehouse demand. Retail pricing was hard to justify as 2020 began, a change there may make it easier for the retailers that remain.
I will examine some of the changes we are seeing today in future letters, but my 2 minutes are almost up. I will leave you with this: in the past I published a commercial real estate blog called DCMud, which I am now publishing here instead. I hope you enjoy these as much as I enjoy what I get to do for a living.
Thanks
Ken Johnson