The brokers who handled the sale of Marriott International Inc.’s Rock Spring headquarters to an operator of senior living communities say the deal is a continuing sign of “positive momentum” in the market.
Erickson Living bought the 775,000-square-foot building in December with plans to build a continuing care retirement community after the hotel giant moves into a new headquarters under construction in downtown Bethesda.
While Erickson hasn’t filed detailed plans for the 33-acre property off Fernwood Road, plans for two other large developments nearby are taking shape, including a townhouse community by EYA on Rock Spring Drive across from the former Marriott building and upgrades to Westfield Montgomery Mall that include new shops, housing, a hotel and a fitness center.
Real estate company Savills Studley brokered the $105 million deal between Erickson and Marbeth Partnership, the owner of the Marriott building.
“It’ll start to change the nature of Rock Spring Park,” Savills Studley Vice Chairman Art Greenberg said of the three projects. “That will create some positive momentum for that area.”
Savills Studley faced challenges marketing the property on Fernwood Road, in an area of several corporate offices, given the lack of a nearby Metro station and imposing size, said Parker Lange, the company’s corporate managing director.
Transit is a major factor in real estate throughout the D.C. region with businesses looking for easy access to Metro, but Rock Spring has overcome those difficulties recently by targeting residential developers, the brokers said.
“You are going to see a part of Montgomery County that is revitalized quicker than many thought it would because of the lack of Metro,” Lange said. “These two or three developments are really going to jumpstart that entire area.”
Greenberg and Lange said Erickson was one of many companies considering the property, and Savills Studley received a variety of different preliminary plans from home developers, master builders and even a large nonprofit.
“This was very well-received in the marketplace,” Lange said. “It’s not for everybody because of its size, it’s so large that a lot people said they just couldn’t bite off something that large, but it was very well-received by those who could.”
Erickson operates 20 senior living communities in 11 states, including three in Maryland.
One real estate market analyst says real estate in the county may continue to shift away from commercial buildings toward residential communities.
The EYA townhome project was originally slated to by office space, similar to a development proposed on the site of another senior living center planned in Gaithersburg.
“The trend has been in recent years for office users to move to more walkable, highly-amenitized spaces,” said Jonathan Chambers, vice president at consulting firm Delta Associates. “Corporate office parks are really struggling to attract office tenants. [The Erickson deal] wasn’t exactly a surprising piece of news. It was always probably going to be residential.”
Chambers said the county remains a desirable location because of its demographic advantages such as high education rates, but the private sector is somewhat struggling. Employers can still feed off of major entities such as the National Institutes of Health Clinical Center and aerospace and defense company Lockheed Martin in Bethesda, but costs for businesses are higher in the area than nearby Prince George’s County, Virginia and the District.
“It is going to be a struggle to attract new employers,” Chambers said.
This story has been updated to clarify the comments made by Jonathan Chambers to reflect his analysis of the private sector, not all businesses.
Charlie Wright can be reached at firstname.lastname@example.org