For many years, the D.C. development landscape was defined by cranes dotting the skyline. Those days are gone, leaving many sites that were once planned for development sitting vacant.

And as these sites languish, with developers unable to begin construction, longtime owners are starting to give up on them.

A ramp-up in interest rates, inflation, supply chain and labor issues, and banks pulling back on real estate lending all contributed to a construction slowdown nationwide.

In D.C., the slowdown was more like a grinding halt. Over the past three years, just two office buildings have started construction, and on the multifamily side, the city experienced a 79% drop in starts last year.

This construction cooldown came after a period when money was cheap and developers were giddy about building new multifamily. Many projects that were conceived during those optimistic years remained unbuilt, and as they languish, these sites have been burning holes in developers’ and lenders’ books.

Now, more developers are either deciding to give up on these properties and put them on the market — or being forced to give them up by their lender.

“For certain projects, both the capital sources and the developers have reached an inflection point where the former plan is no longer viable, and they need to do something with the asset,” Mac Realty Advisors Executive Director Andrew McAllister told Bisnow.

This summer, JBG Smith sold a NoMa site it had owned for more than a decadethat was slated for a 475-unit development.

In the spring, Newmark began marketing a 3.1-acre lot at the former Sursum Corda housing development, entitled for up to 683 units, on behalf of the owners, Toll Brothers Apartment Living and L+M Development Partners.

Grocery chain Lidl brought to market a 2.3-acre Crystal City site approved for two office buildings after it didn’t find any interested developers. Cohn Property Group is marketing it as a multifamily opportunity.

Feldman Ruel is marketing a parcel next to the Congress Heights Metro station, which is approved for a 227K SF office building with 9K SF of retail.

A site approved for 92 units of senior affordable housing near the National Arboretum was just purchased by a new development team after the previous owners abandoned the plans, citing elevated interest rates, the Washington Business Journal reported.

Additional development sites have come to market in Shaw, Tenleytown and near the Waterfront Metro station.

Although each scenario is different, similar undercurrents run throughout. Developments that were planned before the pandemic or in its early years don’t pencil like they once did. It has become cheaper to acquire properties than to develop. And getting construction financing is difficult: Banks are more selective about commercial real estate investment while at the same time increasingly offloading nonperforming loans from their books.

“There’s been a slow drip of properties being sold, foreclosed on, coming to market,” said broker Marty Zupancic, head of Marcus & Millichap’s Zupancic Group. “From our standpoint, the last six months, we’ve seen a huge uptick in banks making decisions to like, ‘OK, we’re foreclosing now. We need these off the books.’”

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