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March 6, 2012  
 
 
 
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DC's Top 5
Office Submarkets

The Human Resource Leadership Awards promote and advance excellence in the greater Washington community. Recognized are those who have demonstrated exemplary leadership and strategic vision within the HR function. Find out more here.

 
2012 might not end as Washington's biggest year ever, but the area's office market still stands out from the competition. We (informally) polled some experts about the region's five hottest submarkets.
 
1. Penn Quarter
Amy Bowser
Despite a slower-than-average East End leasing market, Penn Quarter continues to see “great demand,” JLL's Amy Bowser tells us. “There are fewer deals than before, but there are still vibrant, exciting tenants,” she says, evidenced by recent deals by LivingSocial, Sound Exchange, and China TV. The neighborhood— which stretches between 6th and 11th—is close to power players on Capitol Hill and has name brand recognition with Pennsylvania Avenue. Overall vacancy is below 10% and rents have generally held steady, although concessions are higher than in past years. Her outlook: “2012 will not be dissimilar to 2011.” (Though it might have one more double negative.)
 
UMD Colvin (Feb) MDCRE
2. Clarendon
If a company depends on young employees, it's probably looking for space in Clarendon. (Bonnaroo has the vibe but not the amenities.) “Out of the whole RB Corridor, Clarendon has the best mix of residential and retail,” C&W's Cy Kouhestani tells us. “Locating in that kind of environment is a strategic way to retain and recruit talent.” Constrained supply means that “vacancy is almost non-existent” at about 5%, and asking rents for Class-A space are in the mid to high $40s/SF. B.F. Saul's Clarendon Center project is a great case study for leasing dynamics in the area, he says. After delivering in mid-2010, it quickly reached its current 93% occupancy, attracting tenants from both inside and outside Arlington, “growing rents from $42 to $46/SF in the process.” An opportunity to watch: The Defense Intelligence Agency's BRAC-induced departure from 3100 Clarendon Blvd, which will bring 215k SF to the market in mid-2013.
 
Reznick (Build) JDCRE
3. Capitol Hill
 
Direct vacancy in Capitol Hill comes in at just 5.3%, Delta Associates national research director Sandy Paul tells us. "With an office inventory of 4.7M SF, it might seem small, but it outperformed some of the District's most prominent submarkets last year from an absorption perspective." Leasing activity in the submarket (bounded by 3rd Street NW, 15th Street NE, US 50, and the Southeast Freeway) has been steady, typically dominated by government agencies, media companies, associations, and lobbying shops. And the future is bright. "We're hearing a lot of concern about the impact of federal cuts on lobbying, he says, "but a smaller federal pie means more fights over the slices. A deceleration in spending growth is likely to lead to more lobbying rather than less, which bodes well for the area."
 
4. NoMa
 
Sandy also tells us NoMa is becoming a destination for companies looking to save without sacrificing location: "Absorption there last year was 271k SF," he says, the third-highest total in the District. Many tenants that would have traditionally located in Capitol Hill or the CBD headed to NoMa thanks to a greater availability of space at attractive rental rates, he says, and developers are betting that the trend will continue. Projects under construction: 1111 N Capitol St NE and 165 N St NE, totaling 850k SF.
 
5. Springfield
 
Activity around BRAC, Ft. Belvoir, and the new National Geospatial Agency HQ is fueling interest in Springfield, local CBRE research chief Marianne Swearingen tells us. "Lots of government and defense tenants are looking in that market," she says. "Deal velocity might not be as high as you'd hope it to be, but I think that's more due to the overall economic situation." (Plus with more great late night TV on, more people are falling asleep on the Metro and winding up there anyway.) Boston Properties and Monument are both working on projects in the area, and COPT inked a 103k SF lease at its Patriot Ridge office park in November.

Bisnow
Automenity Motors On
 
Automenity CEO Paul Johnson says that his service, in which technicians come to your place of employment to diagnose and fix your car problem right on the spot, has grown to 86 locations in the DC metro area. It’s also partnering with Colonial Parking to serve its 250 locations. New service offerings include complete vehicle pickup and delivery for Maryland and Virginia state inspections, as well as windshield chip fix/replacement and lockout assistance. To make this innovative idea even sweeter, Paul is offering a March special: an oil and filter change (five quarts standard oil), top off all fluids, complete vehicle inspection with checklist, check engine diagnostic, and cooling system pressure testing for just $29.99. For more info on our sponsor, click here.

Bisnow
ABA Signs HQ Deal
 
The American Bar Association has inked a 61k SF HQ deal at Washington Square, which recently received a $14M renovation courtesy of co-owners Lerner and Tower. We guess they're a big fan of the legal sector: The building recently inked lease extensions and expansion for law firms Baker Hostetler and Gibson, Dunn & Crutcher. C&W's Brian Tucker and Brian Raher repped ownership; Studley's Arthur Greenberg, John Goodman, and Bie Chu Lee represented the ABA.

Bisnow
Ken at the Kennedy Center
 
At the DC CAPital Stars reception last night at the Kennedy Center, we snapped Mack-Cali leasing director Ken Smondrowski and wife Rebecca. Ken tells us their buildings at 1201 Connecticut and 1400 L are seeing a lot of activity for limited vacancy, and that there’s a great opportunity for the right tenant at their Greenbelt buildings at Capital Office Park as well, near the Beltway at Kenilworth. They own six buildings there, and one of them (6406 Ivy Lane) has seven floors and up to 150k SF available after the recent departure of Hewlett Packard—perfect, he says, for someone’s HQ. Ken’s on the board of GWCAR and reminds everyone to come to the Eliot Spitzer summit this Thursday morning. Meanwhile, Rebecca is running for the Board of Education in Montgomery County. Last night’s gala raised money for the DC College Access Program, which supports making college affordable for all DC kids. Check out additional coverage in today’s Scene Bisnow.

Bisnow
Union Market Comeback?
 
Edens' Steve Boyle describes the James Beard Awards as “the Oscars of the food industry.” So it makes sense that his firm is using this June's James Beard Foundation dinner to introduce its newest restaurant and retail project, Capital City Market. Located at 1309 5th St NE, the 25k SF building—also known as Union Market—“has been the food hub of DC for the last 70 years,” says Steve. It was gutted by a fire in October, and Edens aims to “play off the historical nature of the place and breathe some life into it.”
 
Here's what it'll look like. Edens owns six parcels around the market totaling 30 acres, Steve says, and it's working on projects there not yet ready for announcement. The dinner celebrates the re-opening of the market, which has 30 vendors lined up, including wholesalers and retailers. It fits in to Edens' strategy of “creating places that are authentic and communal,” Steve says, as well as representing an opportunity to enter an up-and-coming neighborhood.
 
Send story ideas to mike.leon@bisnow.com.
 
 
 
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