No bites yet for Rosslyn office projects as leasing market softens


Rep. Jim Moran, center, was at the groundbreaking ceremony on Oct. 14, 2010, for the planned office tower at 1812 North Moore in Rosslyn. (Jeffrey MacMillan/For Capital Business)

One project started nearly a year ago with a snazzy groundbreaking ceremony.

The other has starred in a marketing campaign for years as “the business center of the nation’s capital.”

They are Rosslyn’s two planned office towers, 1812 North Moore and Central Place. Their owners, Monday Properties and the JBG Cos., have made every effort to attract the attention of high-end office tenants, but have yet to announce any leases.

The leasing market, meanwhile, is showing signs of softening.

“We really saw a dramatic pullback in terms of leasing activity, partly from the federal government, who really drove all the action in 2010,” said Scott Homa, vice president of research for the brokerage firm Jones Lang LaSalle, of the third quarter.

Congress has been slow to approve new government leases, Homa said, leaving federal agencies with little certainty about their future. A request for new space for the National Science Foundation, for instance, was submitted to Congress in 2010 but has not been approved.

Many private firms extended leases shortly after the financial crisis to take advantage of reduced rates, Homa said, leaving fewer to be had today. “We are just in an environment right now where there are not a lot of major lease extensions,” he said.

For Monday Properties chief executive Anthony Westreich, the leasing clock began ticking last October, when the company held a groundbreaking for its 581,00-square-foot building. At the time, Westreich said the company was immersed “in deep negotiations with five different tenants right now.”

Nearly a year later, no deals have been announced. The company’s partner in the project and nine other Rosslyn buildings, Lehman Brothers, reported in a court filing in July that it planned to sell its stake in the 3.2-million-square-foot portfolio to Goldman Sachs for at least $385 million to help repay creditors.

Monday has the option of completing the parking garage near the end of this year and then halting construction. The company declined to comment for this story.

Terry Holzheimer, director of Arlington Economic Development, said the building should lease up as tenants see just how upscale the business district is becoming. “In the past we’ve been the cheaper option and now Arlington is one of the more expensive options, so our place in the marketplace is changing,” he said.

Monday is not alone in beginning construction without tenants. Lerner Enterprises is building a 476,000-square-foot building in Tysons Corner, and the Macerich Co. plans to begin its own Tysons building early next year.

JBG has not announced when it will begin its Rosslyn project, 521,000-square-foot Central Place, but in March it began another office project, 800 North Glebe, in Ballston, and last month said that the consulting firm Accenture had agreed to lease 100,000 square feet there, moving its Northern Virginia headquarters from Reston.

John Germano, executive managing director in CB Richard Ellis’s D.C. office, said he believed both Rosslyn developers were seeking rents of more than $60 per square foot. “Those will be unbelievable projects,” he said. “They will be filled up … Now whether they fill up in the timeline of when the owners underwrote the lease-up, that’s another story.”

Both Rosslyn developers can be heartened by the success. Skanska USA had in filling 733 10th Street NW in the District, a project begun with no leases at the outset but which was 90 percent committed by August. Homa said that despite the soft leasing market, he thought developers building now would probably be okay.

“There’s always a first mover advantage to new development. When there is new construction underway it usually takes 20 or 30 months to deliver, so you’re not as concerned with the immediate short-term demand as you are for the long-term,” he said.

Jonathan O'Connell has covered land use and development in the Washington area for more than five years.
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