Atlantic Realty Cos. of Vienna is owns, develops and manages more than 6 million square feet of offices, shops and residential units in Maryland and Virginia. David A. Ross, the partner and co-founder of the 12-year-old company, shared his views on the regional commercial real estate market.
Q What projects
Atlantic Realty Cos. partner and co-founder David A. Ross thinks the time is right for developments such as the 500 Maple Avenue project in Falls Church, right.
(Atlantic Realty Cos.)
are you starting?
A As most of the marketplace knows us, we've been predominately suburban office developers. But this marketplace and market timing has given us a chance to broadly [diversify]. We've found ourselves doing from-the-ground-up development of retail office and residential. And we've found ourselves doing retail and medical-type office space. We're doing pre-leasing of properties and build-to-suit for tenants in the marketplace.
Is the space left from technology companies filling up?
Yes, we've seen a substantial amount of our sublease space here in Northern Virginia getting absorbed. It's getting absorbed by many of the companies that are out doing business with the government. Companies like Computer Sciences Corp., Unisys Corp. and SAIC [Science Applications International Corp.]. . . . In Tysons Corner, Reston-Herndon and Fairfax Center -- those are the three primary markets where we're seeing substantial firming up of absorption and a decline in vacancy.
What areas still have not recovered?
All three of the market areas in Northern Virginia [Tysons Corner, Reston/Herndon and Fairfax Center] have a ways to go in recovery. Although rents are firming up, we still have vacancy. We still have an issue of market rents not meeting the cost to support new buildings. We still need to get some of this vacancy leased. And we have a substantial increase in the cost of construction. . . . We're seeing rents today in Class A office space in Northern Virginia ranging from $24 to $28 a square foot. So the rents that are needed to support that new construction just aren't out there today.
What kind of rents do you need to support new construction?
The price of steel and cooper has gone through the roof. What we needed until recently to support a stable type of market would have been rents between $28 to $30. . . . And now, with the rising cost -- we've seen where steel and copper have gone up as much as 60 percent -- we need rents of between $32 and $34 a square foot.