JBG Smith CEO Matt Kelly On The Return To Office And Preparing For The Next Generation Of Tenants
For months, companies have been talking about returning to the office in September, but as the end of August rapidly approaches and the number of Covid-19 cases continues to fluctuate throughout the country, that return date is looking less certain.
Few people have been keeping a closer eye on the office market than JBG Smith CEO Matt Kelly. The company’s office portfolio includes more than 11M SF, primarily in urban locations — including Downtown Washington, D.C., National Landing, the Rosslyn-Ballston corridor, Reston, Virginia, and Bethesda, Maryland.
JBG Smith is also the leading owner, manager and developer of National Landing, a vibrant mixed-use community that encompasses Crystal City, the eastern part of Pentagon City and the northern portion of Potomac Yard that will be home to the new Amazon HQ2.
Kelly was the guest on this week’s Walker Webcast, during which he spoke with Walker & Dunlop Chairman and CEO Willy Walker about the return to the office, the future of National Landing and JBG Smith’s lasting commitment to the greater D.C. area.
Walker asked Kelly about an article in the Washington Business Journal that described Kelly as someone who “breaks the status quo.” Kelly said this is likely referencing the fact that he never takes things at face value without questioning why.
“When we were pursuing the Amazon HQ transaction, there was a process that was put in place that we were expected to follow, and we did,” Kelly said. “But we still did everything in our power to stand tall and distinguish ourselves from our competitors.”
He said that JBG Smith invested in marketing resources to support what the commonwealth of Virginia and Arlington County were doing to woo people to the area, because the company recognized that this needed to be a pull-out-all-the-stops effort.
National Landing is just one of the many projects JBG Smith is involved in in the D.C. area. In fact, Walker pointed out that the company owns and manages more than 20M SF of office, multifamily and retail properties in greater D.C. He added that despite the company receiving offers to branch out into other markets, it has always stayed committed to the area.
“We have always had considerable opportunity in our home market, and the opportunities in that market have always stood out as the ones that we're best equipped to monetize and create value from,” Kelly said.
He added that having such a strong local presence has always given JBG Smith a leg up on competitors that come into the D.C area.
The Return To Office
Despite JBG Smith’s massive office portfolio, Kelly said the company’s tenant group that was most impacted by the coronavirus pandemic was retail. He added that parking tenants also took a hit, and while the numbers are going up, they are nowhere near where they were prior to the pandemic.
According to Kelly, the main question on everyone’s mind is: How will people use their office space when all this is over? He said he is seeing more companies push back their return to office, from September to October or even 2022, adding that while no one knows for sure what the future of the office market will look like, one thing to be certain of is that the five-day in-office workweek is over.
“What we're hearing from most employers is that they feel they must offer some level of hybrid work as a workplace amenity because people demand it, and they don't want to find themselves with a labor shortage,” Kelly said. “It's a tough hiring market already, and if you try to have everyone come back to the office five days a week, you are not going to like the result.”
He also said that architects the company works with are now focused on creating more collaborative spaces in offices. After all, if people are only going to be in the office three days a week, they will need to do all the collaborative work they can during that time.
Perhaps surprisingly, Kelly said JBG Smith is mostly seeing long-term lease renewal activity coming out of the pandemic, which he attributed to companies not wanting to go through the process of finding new space right now.
Tech For The Future
Walker mentioned that JBG Smith has teamed up with AT&T to make National Landing “the most technologically advanced infrastructure in the country.” Kelly said that right after winning HQ2, JBG Smith went to Seattle and asked the major tech companies there what drew them to the market so JBG Smith could re-create it at National Landing. While the main answer was talent, which D.C. has in spades, the second answer was seamless connectivity.
These conversations made Kelly realize that National Landing needed to have the latest, most innovative, seamless technology in order to truly bring the vision to light. This is why the companies are investing in 5G, fiber networks and other technological advancements to give potential tenants what they need.
“We want our customers to want to come here because they can do things here they can't do anywhere else,” Kelly said.
On Aug. 18, Walker will host Steven DeFrancis of Cortland Partners. Register here for the event.
This article was produced in collaboration between Walker & Dunlop and Studio B. Bisnow news staff was not involved in the production of this content.
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