The impact of the attacks on the Pentagon and World Trade Center are specific to Washington: The federal government created the Department of Homeland Security, the largest new agency in half a century. The Defense Department's budget ballooned due to the wars in Iraq and Afghanistan. And private-sector defense and security companies that reaped billions of dollars in government contracts went on hiring sprees.
The stock-market crash benefited real estate everywhere, convincing investors that buildings and land were far better investments than stocks. As a result, billions of dollars were spent snapping up buildings in prime locations — including the nation's capital and its environs.
The Washington real-estate market had generally lagged behind flashier markets such as New York and Chicago. Even normally excitable real-estate developers couldn't get too worked up about a city where buildings couldn't go higher than 15 stories or so, the height of the U.S. Capitol building. And for years, a chronically dysfunctional city government and high crime rate further damped interest in the city.
In the past five years, about 287,000 jobs were created in the metro region, which includes parts of Virginia and Maryland, according to Stephen Fuller, director of George Mason University's Center for Regional Analysis. That is by far the most job growth of any metropolitan area in the country, and it sent the region's unemployment rate down to 3.6 percent, tied with nearby Richmond, Va., for the lowest among cities with populations of more than one million, according to the Bureau of Labor Statistics. About half of those jobs came from private-sector firms doing government work.
Huge demand throughout the region has driven up prices for all types of real estate — office buildings, apartment buildings and single-family homes — to new heights. The average price of an office building rose 27 percent in the past 12 months, and the price increases are accelerating, according to Real Capital Analytics, a New York real-estate research firm. In the District of Columbia, the core of the market, office buildings are selling for up to 30 percent more than they cost to build, local brokers say, which is rare in commercial real estate. This year Washington's downtown became the third-largest central business district in the nation in terms of square footage of office space, surpassing downtown Manhattan. Midtown Manhattan is the nation's biggest market, followed by Chicago.
