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October 16, 2008

A big shout-out to great sponsor TRINITY Group Construction, Inc. They start steel erection in Dulles on Northwoods Phase I this week. The project is for 6 buildings totaling 364,000 SF and scheduled to be completed in the 2nd quarter of 2009. Congratulations!


Our headline above refers to advice offered this morning to DC landlords with empty space, during DCBIA's annual State of the Leasing Market, which packed the Press Club. Translation: As tenants grow uncertain about the economy and future space needs, and become reluctant to spend out-of-pocket on moving, landlords should take what they can get, as soon as they can get it.


Not so fast, said Tishman Speyer local leasing head Dan Dooley, pointing out that vacancy rates in the CBD are just half of the 14% of the early '90s downturn, and that even in worst case scenarios, it's unlikely they'll hit 10% in key downtown sub-markets. Studley vet Art Greenberg said there could actually be rent increases for law firms because of constrained supply at core locations. Moderator Zeke Dodson of Cassidy & Pinkard (who showed some very intellectual looking charts like the one above) said it's "business as usual" for re-lets but not for "more complex" transactions like pre-leases and guarantees; he also added a big "thank goodness for GSA." Other panelists included Vornado Charles E. Smith DC leasing head Randy Lennon, Jones Lang association honchess Ellen Herman, DC Acting Director of Property Management Robin Eve-Jasper, and the Public Building Service's Bart Bush.


Ellen Herman, left, who specializes in non-profits, said she feels conditions are "significantly tipping" in the favor of tenants, though she added to laughter "I'm not sure the landlords are realizing this yet."  Panelists echoed her view by pointing to higher TI concessions, rent abatements, and lower commissions. Still, Ellen said some associations coming out of ten year leases are in for sticker shock.  Art said that up until 18 months ago, he'd only seen one deal that didn't happen, but since then he's seen a number where firms decide to take less space or just renew. Still, he says real estate activity here is much better than in New York.  


Hickok Cole's Mike Hickok, Boston Properties' Peter Johnston and DLA Piper's Betsy Karmin.  Betsy just handled the closing of the Boston Properties/NPR deal and is now working on a real, honest-to-goodness construction loan from a BANK! The loan will fund a $68M mixed-use development downtown. Mike reports his firm recently won the 140k SF Center of Strategic and International Studies HQ project on Rhode Island Ave.


Landlord reps JBG's Brian Fitzgerald and Tishman Speyer's Andy Eichberg put the squeeze on West Lane's Gannon Rich. Gannon reports his clients are waiting to see how the election and rescue plan get sorted out. Brian is excited about the 300k SF 800 North Glebe Rd office project that JBG's breaking ground on in the next couple of months. Andy's annual golf fundraiser last week for the James L. Eichberg Foundation raised over $40k to support research for cancer cures.


Clark acquisition head Becky Owen and Northwestern Mutual local chief Eric Ekeroth, second and third from left, have worked on many deals together, like a $1B "construction perm" (evidently not a hairdo) for the Hudson Apartments in Clarendon. Joining them this morning for pre-game coffee: Clark development exec (eg, for Capitol View) Debbie Ohlamacher and Lincoln Properties' Jamie Connelly. Jamie says they'll be doing a 60-100k SF "NoMa Metro" development (formerly a warehouse) adjacent to XM that "will be ideal for an association headquarters and tax exempt financing."

Brookfield Properties
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