The recent fall of development and loans in the DC Metro area

Bar graph comparing total loan amount and the total square footage under development building inventory

The office development pipeline in the DC Metro area has remained notably subdued in recent years, paralleled by a decrease in lending activities from banks. Several factors contribute to this trend: diminished demand for new tenant spaces owing to reduced office requirements amid a gradual return to pre-COVID work levels, and cautious lending practices among banks due to economic indicators like elevated interest rates and a rise in delinquent and default loan payments. The situation is compounded by exorbitant construction expenses. Assets are currently trading below their replacement costs, making the risk unacceptable for lenders.

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