Q & A: Savills’ Joel Coren on foreign investments and Washington real estate

Founded in 1855, London-based Savills provides real estate investment and brokerage services to about 20,000 people worldwide through a network of 200 offices.

But it took until this spring for the company to open a Washington office, when it added Joel Coren and others from CB Richard Ellis. Coren represents offshore funds on U.S. real estate; he talks about why foreign investors are so high on Washington and when they will move beyond the top-tier downtown buildings.

Why do international players need to be in Washington right now?

It’s a very easy market to understand. You know it has a height restriction, so you’re never going to get these big towers popping up, so you know there’s always going to be a supply premium. You have a market that’s bolstered by the federal government, which gives you a very, very secure tenant base. And to be quite frank with you, that’s why most investors, not just offshore but domestic, flocked to Washington post-recession, because it was one of the few markets across the United States that was still relatively solid in terms of employment growth. . . . Compare that to New York, where we had up to a 50 percent decrease in rents pretty much overnight.

Do you think the height limit will ever change?

Oh, that is a million-dollar question. I hope not. That’s above my pay grade. I mean, I’ve operated in a couple of markets before [that have similar restrictions]. For example in London they have viewing corridors, where you can’t block certain views. As commerce starts to build you tend to find that those corridors don’t get changed completely but they get varied. . . . You might have pockets that pop up here or there but I can’t see them putting up a blanket revision.

What are the prospects of real cuts to the federal government?

First of all, the government has to cut money, there’s not doubt about that. It depends where those cuts are made. I think regardless of what cuts are made, you also have a very strong market as it relates to general commerce. You have a market that I think is quite well diversified.

Savills has been around since the 1800s. What took so long to open up in Washington?

It’s a good question. I think as you’ve seen markets in real estate and the financial sector become more global, and also companies evolving over that period of time, shareholders want to see that you have a global footprint.

Give us a preview of what the next wave of international deals in Washington will look like.

You can bet your bottom dollar that it’s going to be Class A [top of the line office buildings]. I think we’ll start to see a move towards less-stabilized assets. And what I mean by that is that most offshore investors — most of them, not all of them — have looked for long-term leased, Class A buildings. I think as the economy begins to improve here, particularly in gateway cities, investors will look more toward a value-add type strategy. . . . I’m not talking about development, I’m not talking about 10 percent leased, I’m talking about buildings that may have 20 to 30 percent rollover [of leases] in the next 15, 18 months where they can capitalize on what is perceived in the market as improved rental growth.

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