WASHINGTON, DC–Ever wonder why firms are building new office product in the Washington DC area, despite the clear oversupply? Transwestern EVP George Vogelei has an answer: Tenants are willing to pay a premium for office space that helps them compete for talent, and that demand is driving new office construction in the District, he says.
He points to Carr Properties' 7272 Wisconsin Ave., which is under construction and recently announced that Fox Television Stations is planning to build out 57,500 square feet at the planned 937,000 square foot, mixed-use development.
Besides Fox, the building is close to having several other leases signed, Vogelei tells GlobeSt.com. “There are a couple of LOIs outstanding for the property and if all are signed the building will be 50% pre-leased,” he says. Furthermore at mid to high $60 per square foot full service, the rates are 20% higher than the previous high water mark in Bethesda.
Transwestern is leasing 7272 Wisconsin Ave.
7272 Wisconsin Ave.'s experience reflects a dichotomy in the area: lackluster absorption with asking rates that are rising. To be precise, the District of Columbia posted negative absorption in third quarter, as asking rents increased by 0.2%, according to Transwestern. The answer to the that riddle, of course, is that only certain buildings — the new trophy products coming online — are in a position to command higher asking rates. Even so, these high-end building are locked in a battle for tenants.
There is an amenities arms race under way, Vogelei notes, with the latest twist being a push into services.
“Amenities can only get so big and luxurious. Think about it like a gym that has begun offering personal training, special classes and dietitians on staff,” he says, Likewise with office buildings the market is seeing concierge services becoming more elaborate.
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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.
