In the first year of the pandemic, one bright spot in D.C.’s economy was an uptick in start-up businesses. Business applications with a high likelihood in transitioning into a business with a payroll (high propensity business applications) were up by 8 percent in 2020 the previous year. The trend continued into 2021, with applications up by 37 percent in June 2021 compared to June 2019.1 Most likely, business owners who were greatly impacted by the pandemic were rebranding, taking advantage of lower cost space in the District, and/or beginning to recover.
Now, business applications in D.C. are still high relative to 2019, but slowing down relative to earlier in the pandemic. By the end of 2022, high propensity business applications were up by 5 percent compared to 2019, but down 18 percent compared to 2021.2 The slowing down of business applications relative to the uptick D.C. saw earlier in the pandemic could indicate that businesses are settling into the new economy.
As businesses settle into the new normal, there may be fewer opportunities to take advantage of unique circumstances that were present during the pandemic, such as lower rent or new demands by consumers. Another explanation for the slowdown could be current economic indicators, such as inflation or fears of a recession. In either case, it is still good news that start-ups are interested in D.C. However, as the pace of new business applications slows, it will be important for the District to focus efforts on retention and ensuring that business applications actually transition into brick and mortar businesses.
This chart of the week is excerpted from the forthcoming 2023 State of Business Report: Doing Business Under Fiscal Distress, which will be released on September 29, 2023 at the DC Chamber of Commerce’s 2023 State of the District and Region Conference.
- “2021 State of Business Report: Building Back”, D.C. Policy Center, Washington, D.C.
- U.S. Bureau of Labor Statistics, Business Formation Statistics