Rising Vacancies Can’t Stop the Rising Cranes

From Tysons Corner, to Downtown Bethesda, to the District’s Mount Vernon Square, towering cranes are dotting the landscape, signaling growth and development. Despite an unprecedented amount of available space in some parts of the Metro area, tenants are opting for new buildings with the latest green technology, open & collaborative space, the most efficient use of space, and most of all, a space which defines their brands.

Over the past 15 months, in an otherwise lackluster market, nearly 2.0 million square feet (msf) of space have been leased in properties which have been recently built, under construction, or in the planning phases. In the Core Markets of the District, law firms have been flocking to new construction.  1000 Connecticut Avenue NW, which completed in 2012, kicked off the recent wave with Arent Fox LLP anchoring the property, and Foley Hoag, LLP also opting to relocate there. The LEED-Platinum building is approximately 90% leased and includes prominent signage for Arent Fox, a state-of-the-art fitness center, and a roof-top deck with views of the Washington Monument.  

But it doesn’t stop there. Several properties are currently in various stages of construction, all of which have drawn significant tenant interest, particularly from law firms.  At Carr Properties’ 1700 New York Avenue NW, Sullivan & Cromwell LLP signed on for 57,000 sf while Akridge’s 1200 17th Street NW was able to snag a commitment from Pillsbury Winthrop Shaw Pittman LLP for nearly 106,000 sf. Anticipated to deliver by January 2015, the property will have narrow, efficient floor plates to allow for more natural light and will be aiming for a LEED-Platinum designation.

Covington & Burling LLP recently finalized plans to relocate to a property that is further east than traditional legal locales. The law firm giant leased 420,000 sf at Hines Properties’ City Center, a massive mixed-use development at the edge of the District’s East End submarket. The office space will boast efficient floor plans and column-spacing, views on all four sides and a LEED-Gold core and shell.  Arnold & Porter, LLP followed suit soon after by committing to 376,000 sf at 601 Massachusetts Ave. NW, Boston Properties’ proposed 478,000-sf building. Not surprisingly, the law firm cited space efficiency and a “vibrant and innovative” work space as reasons for its relocation.

In Northern Virginia, the charge to new construction has been led by government contractors.  In early 2012, CNA’s Center for Naval Analysis and Institute for Public Research leased 175,000 sf at 3001 Washington Boulevard in the Rosslyn-Ballston Corridor. The 210,000-sf property, under development by the Penzance Companies, is already fully leased and scheduled for delivery in early 2014.  Over in Tysons Corner, LMI agreed to purchase 170,000 sf at 7940 Jones Branch Drive, delivering in 2015, while Intelsat chose Tysons Tower for its 188,000-sf headquarters, a 510,000-sf property which will be completed in 2014 and reportedly has another large tenant in the wings.  

Finally, speculative construction has arrived in Downtown Bethesda. While yet to secure a tenant, 4500 East West Highway will bring 220,000 sf of amenity-rich, efficient, and flexible space to Montgomery County next year.

Tenants’ penchant for new construction shows no signs of letting up, despite less than stellar office market conditions predicted for the balance of 2013.

Maria Sicola, Head of Research, Americas
Paula Munger, Regional Research Director, Mid-Atlantic/Southeast

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