The next Aspen is . . . Bethesda?

FORTUNE – January 14, 2015

The D.C. suburb is making its “quiet wealth” a little bit louder with new developments and retail downtown.

Not too long ago, luxury in the real estate world meant colossal extravagance--whether in the form of square footage, landscaping or ZIP Codes. In Washington, D.C., area, it often meant living in the suburbs in a 9,000-square-foot home with a staff to manage the estate’s grounds, pools and tennis courts.  

Today, luxury has far more to do with convenience than acreage or palatial pad.

People want to be in a place with a mass of activity,” says David DeSantis, partner and managing broker of TTR Sotheby’s International Realty. “I want all my shops, entertainment options and restaurants at my fingertips. That’s luxury.

DeSantis sees the trend of convenience as luxury--something New Yorkers have known for ages--unfolding across the country, from Miami to Los Angeles. Bethesda, Md., just eight miles from the White House, offers one of the best examples.

Baby Boomers who have lived in suburban Montgomery County—one of the wealthiest and best educated counties in the country—have been ready to transition out of the big house for years, but the economy didn’t allow them to move, DeSantis said. “Now, they’re moving back to the urban core.

The area called downtown Bethesda--a once modest community--now centers around Federal Realty’s Bethesda Row and boasts shops such as luxe beauty retailer Bluemercury and an Apple (AAPL  -0.24%) store, high-end movies at iPic Theaters and dining options such as Jeff Black’s Black’s Bar & Kitchen and Robert Wiedmaier’s Wildwood Kitchen.  SoulCycle, partially owned by Equinox Fitness (which already has a location in downtown Bethesda) opened nearby in December with $30 drop-in spinning classes. And celebrity chef Mike Isabella, runner-up on Top Chef All-Stars, recently announced he’ll open a new Greek restaurant called Kapnos Kouzina on the same block this summer.

With all the upscale shopping and entertainment options, it’s only natural that upscale housing join the mix. DeSantis is banking on the appeal of such residences.

Sotheby’s is overseeing sales for The Lauren, a boutique luxury condominium project that will open in 2016 with a $10.5 million penthouse that will make it among the most expensive condos ever to sell in the Washington area. The project is a venture between 1788 Holdings and Persimmon Capital Partners, both based in Washington.  DeSantis said the target demographic is empty nesters who want all the luxury but none of the maintenance--so they can travel three months a year and not worry about keeping up a mansion while they’re overseas.

The 7,300-square-foot, three-bedroom, four-and-a-half bedroom penthouse will sit atop the eight-level development in the heart of Bethesda.  It will have direct-access elevator with a private vestibule, a kitchen with Wolf and SubZero appliances (whether they will ever be used is another matter) and a 1,500-square-foot private terrace. The condo also has its own 100-bottle Thermador wine refrigerator.

All residents of the building’s 29 units will have access to 24-hour concierge service; valet parking; a wine lounge and screening room, which will house a private, climate controlled wine storage unit; and a shared rooftop terrace with a catering kitchen, flat screen television and dining area. The units will also feature smart systems, so residents can control appliances, shades, lighting and electronics from a central control panel or through a mobile app.

Jane Fairweather, a Coldwell Banker residential agent who sells nearly 200 homes per year in the area, said she has seen the single-family homes closest to the commercial district in Bethesda triple in value in the last seven or eight years.  But even so, The Lauren prices surprise her. “We don’t have anything like that yet,” she said.  “I can’t point to anything saying that people are willing to spend that much and not have a water view.  But I’m hoping they’ll be wilding successful.”

While plans for The Lauren have created plenty of buzz in the neighborhood, it is far from the only indicator of an uptick in luxury.

Last summer, Washington Post columnist Thomas Heath wrote about the “Aspenization” of south Bethesda, which he says “might be one of the most upscale suburban downtowns in the United States.”

Along with The Lauren, another residential development called The Flats is under construction adjacent to Bethesda Row, with high-end studios starting at $2,500 per month and two-bedroom units renting for up to $5,000 a month.  Its sister condo property, The Darcy, will offer 64 luxury units, with two-bedroom condos starting from $800,000, a full-time porter, espresso-maker in the lobby and fitness area with a private stretching room.  Both developments, rising from precious land most recently used for parking lots, will open this spring.

This complex, called Lot 31 and developed by StonebridgeCarras and PN Hoffman, also includes retail tenants such as Pottery Barn, Pottery Barn Kids, Passion Fish restaurant, Paul Bakery and a new farm-to-table concept from Silver Diner called Silver.

Local business owners are quick to note that Bethesda, despite signs that point otherwise, still caters to the everyman.  Indeed, one can still buy a modestly priced sandwich at Bethesda Bagels, and find school supplies or ribbon by the yard at Bradley Party & Variety.  But with the new high-end developments opening in the next year, it’s increasingly difficult to see the old Bethesda, or to believe it’s accessible to everyone.

“I’ve been here for 22 years,” said Gil Hofheimer, general manager of Euro Motorcars, a stone’s throw from Bethesda Row.  “When I got here, the corner of Bethesda Avenue and Arlington Road was Maloney Concrete,” he said, about one of the busiest intersections in the neighborhood.  Today, the dealership sells Volvos starting at $30,000 and Lotuses starting at $80,000.  Yet Hofheimer still said the affluence of local residents is understated.

“It’s not the ultra rich here,” he said.  “It’s a quiet wealth in many respects.  It’s not that showy.”