Why So Bearish?

Still, Boston Properties seems to have become more bearish on the District's CBD office sector, or at least disillusioned that it will return to its glory days when law firms and federal government would routinely take down huge blocks of space.

President Doug Linde told listeners during the company's second quarter earnings call that the REIT has not seen any demonstrable positive change in leasing in the CBD despite industry talk that it has turned a corner.

Between 2016 and 2019, we are tracking only one uncommitted law firm expiration over 100,000 square feet….We are currently engaged ourselves with two law firms with 2020 expirations of over 100,000 square feet for our availability at that time.

The GSA continues to have a very measured approach to their renewals and we are not aware of any requirements that are net demand generators. The market is now hunkering into its election inertia, which contributes to pushing out decisions.

That all said, he also noted that in spite of the area's “challenging environment” the REIT completed 20 office leases totaling 150,000 square feet across the region.

WASHINGTON, DC-Boston Properties is seeking to recapitalize its stake in Metropolitan Square, a 660,000-square foot CBD office building that it owns via a joint venture with New York State Common Retirement Fund, according to comments made during the Boston-based REIT's second quarter earnings call.

The building lost a key tenant, Miller & Chevalier, which vacated 118,608 square feet to take 84,000 square feet at 900 16th St., NW.

Then, earlier this year WeWork inked its sixth deal in the District, taking 117,769-square feet at the building -- a deal that not only back-filled the space vacated by Miller & Chevalier but illustrated to perfection a larger trend in the area's office market: the emergence of newer industries as growth tenants while more traditional tenants such as law firms and the federal government scale back their real estate footprint. Over the last eighteen months nearly half of the region's expansionary leasing activity has come from coworking/incubator companies and so-called TAMI (technology, media, advertising, media, information) sectors, according to JLL.

To be sure, law firms are still a key tenant here -- a fact illustrated in another Boston Properties office building -- 601 Mass Ave., which it fully delivered in the second quarter. Some three years ago the REIT signed Arnold & Porter to a 20-year lease for nearly 375,000 square feet of office space in the building.

Why So Bearish?

Still, Boston Properties seems to have become more bearish on the District's CBD office sector, or at least disillusioned that it will return to its glory days when law firms and federal government would routinely take down huge blocks of space.

President Doug Linde told listeners during the company's second quarter earnings call that the REIT has not seen any demonstrable positive change in leasing in the CBD despite industry talk that it has turned a corner.

Between 2016 and 2019, we are tracking only one uncommitted law firm expiration over 100,000 square feet….We are currently engaged ourselves with two law firms with 2020 expirations of over 100,000 square feet for our availability at that time.

The GSA continues to have a very measured approach to their renewals and we are not aware of any requirements that are net demand generators. The market is now hunkering into its election inertia, which contributes to pushing out decisions.

That all said, he also noted that in spite of the area's “challenging environment” the REIT completed 20 office leases totaling 150,000 square feet across the region.