CNA Insurance Corp. needed 60,000 square feet in the Washington area.
In a matter of days, the Chicago-based firm narrowed its choice to two empty buildings: one in Reston, another on Montgomery County's high gloss I-270 corridor.
It was a high-pressure, high-speed transaction, and with both developers asking $14 a square foot, the stakes were high, too--more than $4 million over the next five years. Last week, CNA decided to move to the Ward III building along I-270 near Rockville.
The decision was a big disappointment to the Linpro Co., a regional development firm that has offices in Germantown and owns a nearly completed 75,000-square-foot building in Reston, which is considered one of the I-270 corridor's major competitors. The building, valued at over $5 million, was constructed in hopes that a company like CNA would come in and sign a lease for most of the space.
But CNA's affiliate needed to be moved in by Aug. 1. And according to one source close to the transaction, the insurance company didn't want to take chances on Linpro's promise to finish the building on time.
But whatever the reason for CNA's choice, Reston simply didn't have any other large speculative buildings to show CNA.
And that's precisely the way Reston's developer wants it. In 1980 Reston Land Corp., a Mobil Oil subsidiary, declared a moratorium on construction of speculative office space.
"If someone walks in and says I want 60,000 square feet and I want it in August, then there is little offered in Reston right now," says G.H. Buchanan, communications counselor of the Fairfax County Economic Development Authority.
"We just don't want to be overloading the market," said Charles B. Carter, Reston Land's industrial and commercial land sales manager. In fact, Reston's commercial development skyrocketed between 1979 and 1982, when about 1.6 million square feet of commercial real estate were put under construction. By comparison, 2.3 million square feet were constructed between 1964 and 1978.
"If developers are coming in my door and asking to build speculative space I have to say no," says Carter. "And believe me, I've had to say no to some pretty big national developers."
Since the moratorium, Reston Land hasn't allowed a single developer to break ground without first finding a tenant for at least a portion of any proposed building.
Linpro's complex--which is to consist of two identical buildings--was approved just before the moratorium. The Lee Sammis Co. of Irvine, Calif., and Centennial Development Corp. of Springfield, Va., narrowly missed the moratorium.
As of January, Reston had only 6,000 square feet of empty speculative office space, according to information compiled by Fairfax County's EDA. At the same time, 439,000 square feet of empty speculative office space could be found in 22 buildings throughout the county.
As of the first of the year, Montgomery County had about 350,000 square feet of speculatively built office space available in the I-270 corridor, and an additional 850,000 square feet elsewhere in the county, the county's office of economic development reported.
"There is so much empty space that it makes our job easier," said Duc Duong, manager of business development for Montgomery County.
But Richard Ward, whose Ward III building was picked by CNA, isn't resting on his laurels. "I still have 1 1/2 floors to rent," says Ward. "I am not home free."
Other recent developments in commercial real estate in the Washington area:
* Marquee Television Network, a pay TV distributor providing Home Box Office (HBO) programming to subscribers in the Washington area, has leased 12,000 square feet at 12303 Twinbrook Pkwy. in Rockville. The 7-year-old company relocated its corporate offices from smaller facilities in Rockville.
* Chesapeake and Potomac Telephone Co. of Maryland has leased more than 53,000 square feet at the John Hanson Building, 11700 Beltsville Dr. in the Calverton Office Park in Beltsville; the Baltimore-based utility will use the space to reorganize some of its administrative work groups. CBS Inc. has leased 1,800 square feet at the same address for relocation of CBS Records' marketing offices from space in Silver Spring.
* Printer Systems Corp., a distributor of computer equipment, has leased 13,000 square feet at 9055 Comprint Ct. in Gaithersburg.