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From The Ground Up

GSA Plans Give Maryland Brokers Cause for Worry

New Campuses for FDA, Census Bureau To Leave Behind Significant Vacancies

By Dana Hedgpeth
Washington Post Staff Writer
Monday, February 21, 2005; Page E03

The General Services Administration is looking for about 750,000 square feet of space for the Defense Department. And it's seeking roughly 2 million square feet for other agencies.

That's good news for owners and brokers of commercial real estate -- in Northern Virginia, near the Pentagon, and in the District, where the other agencies are expected to find space.

(Craig Herndon -- The Washington Post)

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But this year the GSA, the federal government's real estate arm and one of the largest users of office space in the Washington area, isn't looking for large spaces to lease in the Maryland suburbs. And that's bad news to those who do business in the Maryland real estate market.

Some Maryland builders, zoning lawyers and real estate brokers already were fretting about several large blocks of office space that will become vacant as two agencies consolidate their campuses.

The U.S. Census Bureau plans to move its 6,300 employees out of a half-dozen office buildings in the Suitland area in early 2007 . The bureau is getting a new, 1.5 million-square-foot campus in Suitland. And the Food and Drug Administration will leave about 1.8 million square feet of office space that it leases in the Rockville area as it moves its 7,700 employees over the next decade to a 3 million-square-foot complex under construction at White Oak off Route 29. The White Oak campus is the former home of the Naval Surface Warfare Center.

At the same time, brokers and developers said, the National Institutes of Health in Bethesda has needs less new space because of a smaller budget. The NIH and the contractors that cluster around it had been expanding in recent years .

"With what we see coming, we're going to take a big hit," said David I. Machlin, a first vice president at real estate service firm CB Richard Ellis. "There are buildings in the Rockville area that will go vacant because the government is moving to its own campuses. [the FDA and other agencies] have been the underpinnings of the whole area."

The office vacancy rate in the Maryland suburbs was 11 percent at the end of 2004, and some brokers and landlords said that could rise this year.

Others disagree, saying they are confident that the space will be filled. But they warn that it could take a while.

"We'll see increased demand from service-related firms that are in B-quality buildings in Bethesda," said Roberta Levy Liss, a senior vice president at real estate firm Trammell Crow Co. She said, "They'll want to find better quality space so they'll look in Rockville."

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