Crop of new projects take root in Washington’s fickle office market

A rendering of the office building Republic Properties plans to build at 660 North Capitol Street. (Courtesy Republic Properties)
A rendering of the office building Republic Properties plans to build at 660 North Capitol Street. (Courtesy Republic Properties)

By most accounts, the Washington office market is sagging — vacancy is up, leasing is slow and when there is a government agency or law firm that is ready to move, it is often for less space than they occupied before.

Still, a handful of developers have decided recently that they will begin work on high-end office buildings before they have received firm commitments from prospective tenants.

Three projects beginning within a few weeks of one another share similar traits: They are in transit-accessible, walkable neighborhoods. They all include substantial retail. And they are designed to be energy efficient and wrapped in glass, now a nearly ubiquitous trait among new buildings in Washington.

Steven A. Grigg, president and chief executive of Republic Properties Corp., said he will begin construction in May on a 200,000-square-foot building a block west of Union Station, at North Capitol and G streets. A building next door has attracted a bevy of groups with lobbying roles, among them Google, General Motors, the American Medical Association and the American Iron and Steel Institute.

Grigg said he was confident that more tenants would materialize by the time the building is done in early 2016, and that they would choose his project over other new buildings a few blocks north in the NoMa neighborhood.

“We have a sense that buildings that are really designed to a certain level of quality can have an advantage over buildings that are sort of in a competitive set,” Grigg said.

Grigg and others pointed to a dichotomy in the office market, where new buildings in buzzy, transit-accessible neighborhoods still fair well even as older buildings in the suburbs languish. In a report on the first quarter, researchers from JLL (formerly Jones Lang LaSalle) found unemployment slightly up, vacancy at 16.6 percent and a decline in leasing activity of nearly 27 percent over the past year.

The researcher cautioned that story didn’t apply to everyone, writing that demand was “bifurcated between urban and suburban markets.”

“The appeal of walkable, amenity-rich enclaves of the city was clear, as niche tenants grew their footprints in micro-markets such as Gallery Place, Dupont Circle and Shaw,” wrote the researchers. Meanwhile, cutbacks by contractors and federal agencies in Northern Virginia and suburban Maryland  fueled stagnation in outer suburban markets.

A half mile up Massachusetts Avenue from the Republic Properties project, at 6th Street, Gould Property Co. has begun relocating a group of historic brick row homes in order to erect their own glistening new tower, called 600 Massachusetts Avenue.

The planned office tower at 600 Massachusetts Avenue. (Courtesy Gould Property Co.)
The planned office tower at 600 Massachusetts Avenue. (Courtesy Gould Property Co.)

The 400,000-square-foot glass tower is being built to meet the highest LEED green building standards. It is widely rumored among real estate brokers to be the likely future Washington headquarters for Venable, a large national law firm that has been looking to relocate from 575 7th St. (A Venable spokesperson said no decision had been made.)

Amanda R. Benton, of Gould, said her company had no signed leases but would begin pursuing deals soon. “We’ve had a lot of interest from the 50,000- to 80,000-foot companies, so that gives us the confidence to move forward,” she added. 

In Ballston, a partnership between the Shooshan Co. and Brandywine Realty Trust announced this week that it had begun digging the parking garage for 4040 Wilson Boulevard, a 20-story, 426,900-square-foot office building that will be part of the Liberty Center complex.

Ballston will be bleeding government agencies, as both the National Science Foundation and the National Fish & Wildlife Service are relocating, and John Shooshan, president of the Shooshan Company, said the company will consider pausing construction after the garage is completed if things don’t pick up.

“We are thrilled to be moving forward with this project starting with the garage construction,” Shooshan said in a statement. “As we continue the office component pre-leasing efforts, we are confident that the project will be extremely attractive to tenants seeking large blocks of efficient, quality office space in the Rosslyn-Ballston corridor.”


A rendering of 4040 Wilson Boulevard, a 20-story tower under construction in Ballston. (Courtesy the Shooshan Co.)

Starting construction before lining up tenants can be risky. Just ask the builders of 1812 North Moore, the tallest building in the region, which was largely completed last fall in Rosslyn and remains completely empty

But none of the developers of the new buildings seemed concerned. “What we anticipate in the upcoming economy is more of a winners and losers rather than a rising tide lifts all ships,” said Doug Mueller, senior vice president at JLL, one of the brokers responsible for leasing 660 North Capitol Street.

“I honestly don’t look at Rosslyn,” he added. “It might as well be Milwaukee to me.”

Follow Jonathan O’Connell on Twitter: @oconnellpostbiz

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