SPRINGFIELD, VA–In a deal that augurs all kinds of good things for the Washington, DC area economy and real estate community, a government contractor has picked up two offices in Springfield and Alexandria, Va. The company paid $12.9 million, or just under $96 per square feet for the two properties, which total 135,028 square feet.
The government contractor plans to occupy 30,000 square feet in the Springfield building, which is 33.9% occupied and located at 5501 Backlick Rd., and lease up the remaining space, according to Chandler Pace, who along with Robert Filley of Marcus & Millichap, represented the seller in the transaction.
The second building in Alexandria, located at 5520 Cherokee Ave., is almost fully leased and the new owner just plans to run it, Pace tells GlobeSt.com.
The seller is a local individual who owned the properties for ten years and sold for divestment reasons. Cushman & Wakefield's Jon Mahaffey represented the buyer for the deal.
Government Contractors Are Bullish
This is why the deal portends better times for the area, or to be more precise, for the suburban office market: it illustrates how bullish government contractors have become since the presidential election.
“We are hearing more chatter about government contractors expanding instead of contracting,” Pace says. “Their demand for space is increasing but they don't want to have long-term obligations with high rents so they are looking for price alternatives.” Suburban offices, obviously, are that price alternative.
And as leasing prospects become more positive for these properties, so do investment sales.
“Investors are talking a lot more about shifting their focus to suburban assets because the government contractor market is coming back around,” Pace says. “They also like them because they can pick them up for a cheaper price.”
“Over the next 12 to 24 months, I think we will see an uptick in the volume of suburban office sales,” he adds.
A Good Value For This Buyer
As for these two office buildings, they are an exception of sorts to the picture Pace paints. Investors, not owner occupiers, are expected to be the buyers of these properties. Other than that detail, the sale does validates this theory, Pace says.
The government contractor decided to purchase the buildings instead of leasing space in one of them because it liked the fact it could get the assets at reasonable price compared to inner city office prices of $200 per square foot, he says.
“It thought there was value there,” Pace says.
SPRINGFIELD, VA–In a deal that augurs all kinds of good things for the Washington, DC area economy and real estate community, a government contractor has picked up two offices in Springfield and Alexandria, Va. The company paid $12.9 million, or just under $96 per square feet for the two properties, which total 135,028 square feet.
The government contractor plans to occupy 30,000 square feet in the Springfield building, which is 33.9% occupied and located at 5501 Backlick Rd., and lease up the remaining space, according to Chandler Pace, who along with Robert Filley of Marcus & Millichap, represented the seller in the transaction.
The second building in Alexandria, located at 5520 Cherokee Ave., is almost fully leased and the new owner just plans to run it, Pace tells GlobeSt.com.
The seller is a local individual who owned the properties for ten years and sold for divestment reasons. Cushman & Wakefield's Jon Mahaffey represented the buyer for the deal.
Government Contractors Are Bullish
This is why the deal portends better times for the area, or to be more precise, for the suburban office market: it illustrates how bullish government contractors have become since the presidential election.
“We are hearing more chatter about government contractors expanding instead of contracting,” Pace says. “Their demand for space is increasing but they don't want to have long-term obligations with high rents so they are looking for price alternatives.” Suburban offices, obviously, are that price alternative.
And as leasing prospects become more positive for these properties, so do investment sales.
“Investors are talking a lot more about shifting their focus to suburban assets because the government contractor market is coming back around,” Pace says. “They also like them because they can pick them up for a cheaper price.”
“Over the next 12 to 24 months, I think we will see an uptick in the volume of suburban office sales,” he adds.
A Good Value For This Buyer
As for these two office buildings, they are an exception of sorts to the picture Pace paints. Investors, not owner occupiers, are expected to be the buyers of these properties. Other than that detail, the sale does validates this theory, Pace says.
The government contractor decided to purchase the buildings instead of leasing space in one of them because it liked the fact it could get the assets at reasonable price compared to inner city office prices of $200 per square foot, he says.
“It thought there was value there,” Pace says.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
