If the building closed on or around this price, it would be on par with other recent transactions. In June the Consumer Electronics Association acquired 1919 S Eads St., a 98,750-sf class A property from Charles E Smith for $388.86 per sf. In May 601 S. 12 St. was sold to Brookfield Properties from National Retail Properties Inc. for $425.93 per sf. It is a 540,000 sf, class B asset.
Office valuations in this submarket can be difficult to determine precisely due to the uncertainty created by the Department of Defense's Base Realignment and Closure Commission last year. According to the Arlington County's BRAC Transition Task force, some 76.8% of all office space here is expected to be affected. "Part of the problem with Crystal City is that because the future renewals are uncertain it has caused some deals to hold off," Eric Berkman, senior vice president at Grubb & Ellis in Washington, DC tells GlobeSt.com.
As it happens, the Department of Defense is Presidential Towers' primary tenant according to local real estate records. This can be a potentially destabilizing situation, depending on the terms of the government entity's lease and its long range plans.
Ross Cowan, Transwestern's senior vice president of Acquisitions alluded to these issues in a statement the company released about the acquisition; "The strength of the Northern Virginia office market coupled with the positive momentum created from the repositioning of Crystal City makes this an attractive investment for our fund," he says.
Crystal City is firing on all cylinders to reposition the submarket. Berkman notes that Vornado Realty Trust has built a great streetscape by introducing the right mix of residential and retail. "It is transforming it into a 24-hour work-live environment." He also observed that much of the office supply was obsolete and taking some buildings out of circulation would help the overall office market.
Tonya Ginter, vice president of research for GVA Advantis tells GlobeSt.com that there are already signs that Crystal City is successfully repositioning its office sector to the private market. "It has attracted a number of large tenants from DC lately including Conservation International, Sigal Construction and the Smithsonian's operations division." The Smithsonian museums are located in DC on its famed Mall. But Crystal City is a short drive away. "The Smithsonian staff is still close to the museums but they get better space at a lower rate," she observes.
Transwestern was unable to comment in time for publication.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
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.
