D.C.’s top financial leader says economic uncertainty — led by a crisis in commercial real estate — is here to stay and will continue to cloud the city’s future.
In his first interview since being appointed to the job by Mayor Muriel Bowser last year, CFO Glen Lee laid out the complicated challenges facing D.C.’s economy. Lee and the 1,700 employees he oversees maintain a balanced annual budget of over $20 billion in gross funds, including $11.3 billion from local or dedicated revenue sources.
Uncertainty is better than the recession that was predicted earlier this year, to be clear. But to Lee, uncertainty carries its own problems, some of which are every bit as severe.
“We see no growth in property tax revenue, and that’s stunning relative to the history of the District here in the last 15 years or so,” he said. “And ultimately, that’s the result of lack of habitation of commercial buildings, because people have hybrid work arrangements where they’re not commuting into town five days a week.”
The trends in commercial real estate are troubling, and have been for some time.
Commercial property values fell 9.1% last fiscal year alone, which could cost the District $150 million in annual tax revenue. Meanwhile, tax collections from real estate sales fell by half year-over-year. And Lee cited CoStar’s forecast that commercial vacancy rates in D.C. could grow to 25% by 2026. It is a wildly different scenario than pre-pandemic for D.C. and most major metros across the U.S., which had grown accustomed to “good-to-tremendous” population and income growth as young people surged into urban cores beginning in about 2005, Lee said.
