Members of the Washington-area commercial real estate industry were told this week that they need to pay more attention to the needs of their tenants or risk losing them to new, state-of-the-art, high-quality buildings.
During a daylong seminar sponsored by the Northern Virginia chapter of the National Association of Industrial and Office Parks, developers, builders, lenders, investors and commercial real estate brokers heard glowing reports about projected development in the area for the next five years. The focus was on high-technology buildings along the Baltimore-Washington corridor, referred to by industry leaders as the Baltimore-Washington Common Market. At the same time, industry experts warned that continuing high federal budget deficits coupled with trade imbalances could signal some danger on the economic horizon.
More than 200 local building industry leaders attended this week's seminar and heard a two-hour pep talk focusing on the increasing need for builders and developers to listen to the needs of their tenants.
Thomas J. Peters, author of "A Passion for Excellence," warned that building and leasing is not sufficient in today's office market. He said developers and brokers must take time to visit with tenants and talk to them about their needs before they find that a tenant is not renewing a lease.
Several local builders agreed with Peters. They said tenants in some Fairfax buildings are being offered enticements such as six to 12 months' free rent to move elsewhere. Brokers said problems with plumbing, communication systems and lobbies are just a few of the reasons tenants may seek newer, better quarters, especially if they feel the building owner will not respond to their requests for improvements.
Builders were told that:
*More than two-thirds of the new jobs in Northern Virginia are being generated in Fairfax County.
*It may become harder to obtain money from savings and loan associations for financing commercial projects.
*They will be depending on larger banks and investors to finance projects, and those institutions are likely to have tighter credit policies than those prevailing today.
*Brokers and developers should seek to attract tenants whose stability is not totally dependent on providing goods or services to the federal government.
David L. Winstead, executive director of the Washington/Baltimore Regional Association, said the future for the region is good.
"By 1990, instead of having two major markets in the 17 counties, we will have one [market] from Northern Virginia to Baltimore, creating the fifth-largest office market area in the country," Winstead predicted.
Stephen S. Fuller, professor of urban and regional planning at George Washington University, stressed the need for "interdependency of the two economies." He said Baltimore and Washington have "compensating differences that offset one another. It creates a diversified balance and provides a cushion from recession."
Fuller, in noting that two-thirds of all new jobs in Northern Virginia are being created in Fairfax, said the county "is an extremely important part of the growth of the entire region." Prince William is the second-fastest-growing Northern Virginia county, followed by Loudoun, Alexandria and Arlington counties, he said.
Peter Mostrand, vice president of United Virginia Bank, said more than 22 million square feet of commercial office space is under construction in the Washington area. But he warned that financing for future projects may become more difficult as developers have to depend on big investors and giant financial institutions as sources for money. He predicted that savings and loan associations will play a declining role in financing commercial development.
"The stage has been set for one or more superbanks" to move into the area, which will create what he called a market that will "rival New York and Chicago" as a financial center.
He said savings and loans have suffered from the lack of stable interest rates in recent years, leaving them "vulnerable" to more government regulation, which he said would mean fewer dollars for developers.
If that happens, small builders no longer will be able to depend on their traditional, nearby savings and loans for the support they need to get started, brokers said.
Mostrand, however, predicted there will be more money available for the good projects and "less for the not so good."