Both projects are expected to reach 390 feet, both have been asking for perhaps the highest rents ever in Northern Virginia and neither — to this point — has inked a deal with a tenant or a financing package from a bank.
Monday Properties and its partner Goldman Sachs are moving ahead with their project, paying for construction with cash. Work began in the fall of 2010 and the building is slated for completion in the fall of 2013.
Central Place is to eventually include a 31-story office building with an observation deck, a 30-story apartment building, a plaza containing three elevators to the Rosslyn Metro station and underground parking. The site currently has a temporary plaza on its southern end, facing Wilson Boulevard.
JBG had planned to start construction of its entire project in the second quarter of this year. But instead of beginning work, it sought approval from the county to build the residential portion of the project, a 350-unit apartment tower, first. The Arlington County Board approved the change to the company’s site plan June 16.
Brian P. Coulter, JBG managing partner overseeing the project, cited a lack of financing for the change.
“JBG’s long-term commitment to Rosslyn is unwavering,” Coulter said. “We remain confident in the underlying fundamentals of Rosslyn as a core market, but the general uncertainty about the economy and the state of the current financing environment have made securing financing for a speculative office project very difficult.”
Speculative office buildings (meaning those without any tenants lined up in advance) plunged some real estate firms into trouble when the financial collapse occurred. But the projects are beginning to make a comeback, backed mostly by developers with cash on hand looking to be first to the market with new office space as the economy recovers.
Some of the early developments were rewarded with robust leasing. Skanska USA Commercial Development bought an office project under construction at 733 10th St. NW for $21 million in 2009, completed it, and signed tenants including the National Association of Manufacturers and CMGRP. It sold the building to Jamestown Properties in May of this year for $140 million.
But Skanska completed its building without having to borrow money, much as Monday and Goldman have done thus far. Since then, the leasing market has slowed considerably, with office users occupying 1 million or more square feet less at the beginning of the first quarter than they did at the start.
Financing new office construction is difficult because “the office market is anemic” said Gregory Leisch, chief executive of the Alexandria research firm Delta Associates.
Leisch said uncertainty from the coming elections, expiring tax cuts, the European debt crisis and an upcoming debt ceiling debate is giving banks and investors little reason to think the environment would improve in the time it takes to deliver a new building.
“How would you explain that to your board of directors when three years ago we thought we’d have things figured out by now and things have turned out so badly?” he said.