The office market in Washington D.C. has been less than ideal, thanks to the short-term shocks to the region including sequestration, the government shutdown and mandates that federal agencies must decrease their real estate profiles. While this hasn't deterred investors from commercial real estate in the area, it has shifted their interest to retail space and other non-office properties, which pose less of a near-term risk. According to the Washington Business Journal, the sale of a pair of Northern Virginia retail sites could be the leading edge of that trend, in which the Sterling Plaza and Sterling Plaza II was sold for $26.5 million, as well as the Lake Montclair Center in Prince William County for $19.2 million.
Major utility companies in Washington D.C. including Washington Gas, Dominion Virginia Power and Pepco are threatened by a temporary hit in earnings if the federal shutdown continues for an extended amount of time, according to the Washington Business Journal.
Philadelphia, Pennsylvania suffers from one of the worst property tax delinquency epidemics in the nation. The issue has been going on for decades, and Philadelphia's property tax delinquency tab reached $522 million this April, according to city records. Despite the staggering tab, the city has made efforts to reduce delinquency and saw a reduced rate of growth for the first time since Mayor Nutter took office in 2008. In addition, the city also reduced the volume of delinquent accounts from 102,787 in April 2012 to 97, 310 in April 2013.
According to Philly.com, the latest figures suggest that the city's collection efforts are improving but have yet to yield major progress in the decades-long struggle to contain the delinquency epidemic. However, the Nutter administration has also initiated a series of reforms, suggesting the city government is grappling with the problem more urgently. The reform includes new leadership, new enforcement tools and new city and state laws to combat the long-running neglect of property tax collection. It will take major changes (and many years) to reverse the damage done on the city's devastated neighborhoods, diminished property values, depleted tax base, and suffering city and school budgets.
Sequestration and its $85 billion in federal budget cuts planned for this year will bring significant challenges on the U.S. economy and the commercial real estate recovery. According to the National Real Estate Investor, the forced reductions that began March 1st will have real consequences for the U.S. economy, including eliminated and reduced government contracts, reduced private and public sector jobs and furloughed workers.