May 31, 2012
BISNOW: This Morning In Arlington
Nearly 400 packed the Renaissance Arlington Capital View this morning for Bisnow's annual RB Corridor Summit. The submarket has yet to face significant competition from Tysons for private-sector tenants, experts said, enabling it to weather a slow leasing environment.
While private companies love RB's proximity to the CBD and an educated workforce, GSA rent caps ($39/SF in VA) make government deals hard to come by, said Monday Properties DC chief Tim Helmig (left, with moderator Jonathan Kinney of Bean, Kinney & Korman). His silver lining: Increased interest from Asian and Middle Eastern companies that want to be close to influence centers without higher DC taxes.
Financing for spec office development remains difficult, says JBG's Andrew Van Horn. A developer's options: Opening up its balance sheet for a loan with significant recourse, a big pre-lease, or going all equity. But he thinks the Corridor's rental rates will attract tenants: "Covington paid around $75/SF at CityCenter, and saving $10/SF across the river offers real savings for a big law firm or private user."
For lenders, "it's about the tenant, not the building," according to Penzance founder Victor Tolkan: "If you have tenancy, you can get great debt."
Also on hand: Virginia Rep. Jim Moran (pictured with Ballston BID executive director Tina Leone), who thinks the RB Corridor is the "best place to invest your money in the country."
Shooshan Co. prez John Shooshan gave words of encouragement: "You can get pessimistic about the way things are right now, but you shouldn't be. As an industry, we're not ahead of ourselves like in the late '80s. We're in the best market in the best country in the world. Don't lose hope."
Vornado/Charles E. Smith leasing chief Jim Creedon says his firm plans to renovate 1777 N Kent St (its largest block of available space in the Corridor) and is seeing interest from several private-sector tenants. And he thinks BRAC space coming back to the market won't significantly lower rents: "It reminds me of when the Patent and Trademark Office left Crystal City—there was concern about rents going down, but it ended up benefitting in the long run."
Almost every tenant Skanska has signed since 2010 has shared four characterstics, says the firm's Rob Ward: Relocating from older buildings, leasing fewer square feet for the same number of people, paying an equal or higher rental rate, but lowering their overall real estate spending. Since arriving in Washington two years ago, Skanska has started two spec office projects, and "given the opportunity in a location like the RB Corridor, we'd do it again."
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