Capitals’ and Wizards’ Likely Move to Virginia Forces DC Real Estate to Reassess

Officials are trying to mitigate the economic impact of losing the teams, but much is uncertain

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For anyone who’s paid attention, it’s no secret that Washington, D.C.’s commercial health has struggled in recent years. The city’s downtown offices are more than 20 percent vacant, its Metro faces significant near-term budget problems — and now it faces the fallout from the likely loss of two of its professional sports teams.

Monumental Sports & Entertainment, owner of both the National Hockey League’s Capitals and the National Basketball Association’s Wizards, last month announced plans to leave its headquarters and arena in D.C. ‘s Gallery Place/Chinatown neighborhood for a new campus in Alexandria, Va., by 2028. The relocation of a major sports franchise is a rare event, let alone two simultaneously, but whether the move is a disaster or opportunity for the commercial real estate industry in D.C. remains to be seen.

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First, a history lesson: Throughout much of the 1980s and 1990s, the District wrestled with an economic slump and high rates of violent crime, peaking in 1991 with 509 homicides, equating to nearly 85 killings per 100,000 people at the time, according to city data. When Capital One Arena, then known as the MCI Center, opened in 1997, there were just 14 residential buildings within half a mile of the complex, according to a report by the D.C. Policy Center, a nonprofit think tank.

That number has tripled in the years since opening, with 28 new buildings together adding more than 6,600 housing units in the same geographic area. The commercial change is even starker: The area’s supply of offices shot upward since the arena opened, adding 94 buildings with some 23 million square feet, as did small businesses, with 1,346 companies starting up within a half-mile of the arena since 2000, per the D.C. Policy Center.

That influx of development had negative consequences as well. The cost of living in the neighborhood skyrocketed, which over time forced out much of the remaining Chinese community, businesses and restaurants that had called the area home for decades.

Still, the economic impact correlated with the arena is quite clear: Aside from the groundswell of new tax revenue, an estimated 48,250 jobs were added to that half-mile area between 1999 and 2019, an increase of nearly 30 percent, per the D.C. Policy Center. Yet many of those businesses and jobs have failed or left the area in the wake of COVID-19, and the loss of the arena could further exacerbate the problem. Other draws like the National Portrait Gallery, historic Ford’s Theatre and the city’s convention center are located nearby, though none have the same allure of two sports franchises.

Monumental’s plans are not a great sign that it will get better.

“[It] is disquieting news for a downtown that’s already ailing,” said Yesim Sayin, executive director of the D.C. Policy Center. “It’s hard to tell what direct impacts this could have on the Gallery Place/Chinatown neighborhood in the years to come, but it’s an interesting commentary on the attractiveness of D.C. in general right now.”

D.C. officials aren’t just taking the news on the chin. Mayor Muriel Bowser earlier this month announced a new task force aimed at developing recommendations for future uses of the arena site, in order to mitigate any potential consequences of the relocation. These include identifying temporary and permanent “activation plans,” such as special events, to increase foot traffic in the neighborhood, as well as identifying incentives for redevelopment and community/business investments.

The announcement also comes about a year after the launch of the mayor’s D.C. “Comeback Plan,” which includes the goal of adding 15,000 residents to downtown over five years. There were nearly 2,500 new office-to-residential conversion units in the works downtown about a month after that announcement, Axios reported.

Kenyattah Robinson, who leads the business improvement district for the nearby Mount Vernon Triangle neighborhood, said locals have voiced much concern about what the relocation could mean for their communities. He also said that while the ripple effects of Monumental leaving the district could prove challenging, it does present a unique opportunity to broadly improve and reshape the area.

“If we lose the teams, it would be painful, but I have an extreme amount of confidence in the people tasked by the mayor to look into this,” Robinson said. “D.C. is our nation’s capital — I remember being awestruck by it when I first visited in the ’90s. It remains essential and it will always have an appeal. I would never bet against D.C.”

Meanwhile, as D.C. grapples with a future without Monumental, the company’s planned move to the Potomac Yard neighborhood of Alexandria could prove gangbusters for an area already surging with development and population growth. The Potomac River Generating Station redevelopment will add over 1 million square feet of mixed-use assets; the Landmark Mall redevelopment project will add 4 million square feet, including the relocation and expansion of Alexandria Hospital; and there’s Virginia Tech’s new (albeit recently delayed) Innovation Campus, also planned for Potomac Yard.

In fact, Monumental’s proposed Potomac Yard campus includes far more than just a new arena. Subject to final government approval, developer JBG Smith will take the lead on building a 9 million-square-foot, mixed-use entertainment district that also includes a corporate headquarters and media studio for Monumental, a Wizards practice facility, an expanded e-sports facility, and a  performing arts venue, as well as hotel, apartment and retail space spread over multiple development phases.

JBG Smith declined to comment, though Stephanie Landrum, president and CEO of the Alexandria Economic Development Partnership, said that such a large project helps justify the new Potomac Yard Metro station and incentivizes other projects down the line.

“[Monumental’s new campus] is what will make other developments in Potomac Yard viable,” Landrum said. “This type of entertainment district will naturally attract a lot of people and create a need for projects to support that foot traffic.”

Josh Simon, president of commercial real estate services firm Lee & Associates’ D.C. office, likewise said that Monumental’s move to Potomac Yard is all but certain to have a huge economic impact on top of Alexandria’s other large development projects. Aside from attracting new residents and visitors to the area and increasing land and building values, the projects will also likely boost Northern Virginia’s office market as tenants find the western side of the Potomac River more attractive.

“Exciting is not a strong enough word to describe what’s going on here — it’s unbelievable,” Simon said. “This is really a once-in-a-generation-type situation for this area, especially because of the planning, zoning and entitlements that were already in place for Potomac Yard. It comes as a significant impact for Downtown D.C., but it’s a great situation for Northern Virginia.”