Real Estate Professionals Say There’s Hope on the Horizon For Vacant Office Buildings
At 'Montgomery County State of the Market' event, County Executive Ike Leggett said he's 'reasonably confident' Marriott International will remain headquartered in county
The two office buildings at 6120 and 6130 Executive Blvd. in Rockville
Doug Olson, the executive vice president of Washington, D.C.-based Monument Realty, oversees what he called “probably the largest block of vacant space in Montgomery County”—two completely vacant office buildings at 6120 and 6130 Executive Blvd. in Rockville.
But on Wednesday morning in Potomac in front of about 600 commercial real estate industry professionals, Olson said the “woe is me” feeling surrounding the county’s much-discussed vacant office space problem is about to subside.
“A lot of people will say, ‘Gee whiz, Doug, sorry.’ Don’t be sorry. It’s a great opportunity,” Olson said at the “Montgomery County State of the Market” event, which commercial real estate news outlet Bisnow held on the empty fifth floor of the new office building at Park Potomac.
Olson announced a new tenant just signed a letter-of-intent for a full-building lease of one of Monument Realty’s 150,000-square-foot Executive Boulevard buildings.
He said a full renovation of the buildings and momentum from Federal Realty Investment Trust’s nearby Pike & Rose project, where a first-phase 80,000-square-foot office building is fully leased, helped seal the deal.
“If it wasn’t for what [Federal Realty] was doing down the street, the odds of us pulling off a 150,000-square-foot lease probably aren’t really, really strong,” Olson said. “But with the [White Flint] Sector Plan, with the density and use flexibility that they’ve achieved, it’s created opportunity for all the buildings that everybody points their finger at and says, ‘That’s a real problem.’ ”
Monument Realty hopes to announce the new tenant once a final lease agreement is completed in the next few weeks. It would be one of the largest office building leases signed in the past few years in Montgomery County.
The lease would also fill one of the three completely vacant 1980s office buildings along Executive Boulevard and Olson said it could provide a blueprint for how to fill similar suburban-style office buildings elsewhere in the county as demand for office space remains stagnant and companies seek Metro-accessible locations.
Perhaps the most famous recent example of companies possibly looking elsewhere was Bethesda-based Marriott International’s announcement last year that it plans to leave its Fernwood Road headquarters space in Bethesda once its lease ends in 2021 for a more transit-oriented location.
To some, where the hotel giant and its approximately 2,000 employees land is a test of the county’s ability to retain major companies.
“First of all, Marriott is going to stay in Montgomery County. That is my promise,” County Executive Ike Leggett said at the Bisnow event. “It goes back to the question raised earlier about office space and repurposing old office space. They’re in a location now that, in many ways, they believe is not suitable for a new generation of workers and their mobility and walkability. We have presented a number of sites that we think can respond to their concerns.”
The Friends of White Flint, a nonprofit made up of residents, developers and businesses, is hoping Marriott moves to the Pike District, a branding name for the stretch of Rockville Pike around the White Flint Metro station.
“Bethesda’s maxed out. But in the Pike District, they’ll be able to make the Pike District in their own image,” said Amy Ginsburg, executive director of the Friends of White Flint. “I think that’s a really exciting proposition for a company, to be the centerpiece of a community.”
Serving on the group’s “Pick the Pike District” task force are representatives from major area developers including LCOR, JBG Cos., Lerner Enterprises, B.F. Saul and Federal Realty.
Three of those developers—LCOR, Lerner and the Saul Centers section of B.F. Saul—have large new office buildings planned for the White Flint area.
Olson said Wednesday he thinks those new office buildings will eventually mean good things for the current empty older ones, pointing to Monument Realty’s recent success at Executive Plaza as a prime example.
“You don’t have to win a flight-to-quality deal with new ground-up development. You can win with renovated product, call it Class A space at Class B pricing,” Olson said. Class A office space refers to newer, more modern space. “That, I believe is a big part of the answer for a lot of the vacant space that we have in the county right now.”