The DC Chamber of Commerce released its 2026 State of Business Report: Meeting the Growth Challenge, highlighting the significant economic assets positioning Washington, DC for its next era of growth and the challenges the District must address to remain competitive. The report identifies emerging opportunities to strengthen private-sector growth across technology, cybersecurity, advanced business services, and hospitality. It also examines how continued entrepreneurship, downtown reinvestment and the adaptive reuse of commercial real estate are providing additional pathways to attract investment, create jobs and diversify the District’s economy.
Prepared and produced by the D.C. Policy Center for the DC Chamber of Commerce, the report analyzes economic activity, business performance, employment, workforce conditions, housing affordability and the policies needed to support sustainable long-term growth.
“Washington, DC’s economy is shifting, and our strategy must evolve with it. This report makes clear that while the District faces headwinds, our city also possesses extraordinary strengths, including talent, educational institutions, entrepreneurs, vibrant neighborhoods and global reach,” said DC Chamber of Commerce President and CEO Chinyere Hubbard. “Our opportunity now is to turn those strengths into a new era of private-sector growth, invest in the workforce we already have and make the District a place where businesses and workers can afford to thrive together across all eight wards.”
“DC can no longer depend on the economic growth model of the past. The city’s next chapter will require growing the private-sector economy, investing in the workforce we already have, and making D.C. a place where businesses and workers can afford to stay, invest, and grow,” said DC Policy Center Executive Director Yesim Sayin.
Through dedicated chapters in the report, the content focuses on several key areas. Below are summaries of those sections and insights.
Regional Spending Slows, but DC’s Visitor Economy Delivers
Despite broader economic headwinds and federal reductions, tourism remains a powerful economic engine for the District.
- Broad slowdown across GDP, household income, and consumer spending
- Pressure from recent federal workforce and procurement reductions
- Tourism remains a bright spot, welcoming 27.2 million visitors in 2025
- Visitors spent $11.9 billion and generated $2.4 billion in tax revenue
Downtown Vacancies Carve Path for Reinvention
Commercial real estate conversions are transforming vacant office spaces into residential units and hotels to revitalize downtown.
- Commercial real estate remains a continuing vulnerability for the District, with hybrid work, elevated vacancies, and falling asset values affecting business activity.
- Office conversions provide a pathway for reinvention.
- Eleven conversion projects completed in 2024 and 2025 created 1,904 residential units, 246 hotel rooms, and 592,365 square feet of other uses. Another 10 projects are underway and 34 are in the development pipeline.
Business Formation and Entrepreneurship
Entrepreneurial activity is holding up, but fewer indicators point toward the creation of new employers.
- Total business applications increased 7.8% from 2024 through the first three months of 2026, signaling continued entrepreneurial interest.
- Additionally, high-propensity business applications, those historically more likely to become employer firms, have remained largely flat, while applications from businesses reporting planned payrolls have declined.
DC’s Evolving Labor Market
Changes in federal employment are reshaping the District’s workforce landscape and creating greater urgency – and opportunity – to strengthen private-sector growth and invest in local talent.
- The District had approximately 718,500 jobs in May 2026, compared with 805,400 in February 2020. Federal employment and contracting reductions are adding urgency to the need for stronger private-sector job creation.
- Entrepreneurial interest remains strong: total business applications increased 7.8 percent between 2024 and the first three months of 2026. But applications most likely to become employer businesses have been comparatively flat, suggesting that converting entrepreneurship into sustained job growth remains a challenge.
- Employers also continue to report difficulty finding workers. According to the D.C. Policy Center’s Quarterly Business Sentiments survey, 42 percent of businesses said hiring qualified candidates had become more difficult over the previous two years.
A Slowing Economy, With Important Sources of Resilience
Despite a slowing post-pandemic recovery and declining revenue, strong tourism numbers provide key economic stability.
- The District’s post-pandemic recovery has lost momentum. Real GDP grew by less than 0.5 percent in 2025 before declining sharply late in the year. Real personal income per capita fell 1.4 percent year-over-year in the fourth quarter of 2025, and inflation-adjusted sales tax collections were down approximately 3.8 percent by May 2026.
- Tourism remains a notable bright spot. D.C. welcomed 27.2 million visitors in 2025, who spent $11.9 billion and generated $2.4 billion in tax revenue.
- Downtown, meanwhile, continues to adjust to hybrid work. Office occupancy stood at approximately 48.5 percent in March 2026, while the citywide vacancy rate reached 18.8 percent in 2025.
- Office conversions are beginning to reshape the landscape: projects completed in 2024 and 2025 created 1,904 residential units, 246 hotel rooms and nearly 600,000 square feet of other uses, with dozens more projects underway or planned.
In Conclusion: A Strategy for Durable Growth
There is no standalone measure or isolated solution that will reverse the District’s economic slowdown. Instead, the report calls for an integrated growth strategy built around three priorities:
- Accelerate private-sector job creation, particularly in export-oriented industries such as technology, cybersecurity, life sciences and other knowledge-intensive sectors, with incentives tied to measurable outcomes.
- Invest in D.C.’s workforce, strengthening adult education, career pathways, apprenticeships, credentialing and training tied to employer demand.
- Expand housing supply and affordability by modernizing zoning and building rules, improving permitting and creating more predictable conditions for development.
The full 2026 State of Business Report: Meeting the Growth Challenge was prepared and produced by the D.C. Policy Center for the DC Chamber of Commerce, with support from the Office of the Deputy Mayor for Planning and Economic Development
