An Interview With: John Lesinski
Lesinski, from the Cupertino, California, came east by way of Camp Lejeune, where he served in the Marines from 1980 to 1985, after which he arrived in DC to work in commercial real estate. With Grubb & Ellis since 1990, he became regional head in 2002. The company, headquartered in Chicago, has local offices in DC, Tysons, and Bethesda, with about 40 brokers providing advisory and transactional services for clients such as CarrAmerica, Clark Realty Advisers, and Opus East. Lesinski remains a colonel in the Marine reserves.
Bisnow: You focus on a number of core areas. How’s Tysons doing?
Tysons is strong at the trophy class level. You have a certain number of projects that fall in that category, such as the Tysons II project with Lerner, and the Towers Crescent project with the General Motors Pension Fund. Those buildings are commanding a good price level, activity is pretty robust, and vacancy is low. But once you get down into the B or C product, it gets a little bit more competitive, and I don’t think that demand is quite as strong, although it’s still healthy. The overall vacancy level is 12.6%, but for Class A is 9.6% and for Class C is almost 20%.
How much of the building is offices versus condos?
There are some condo conversions, more in the B class product line, such as the projects along Boone Blvd. and Lewinsville Road, and there’s been a lot of interest in that. We may have seen the top of the condo market in Tysons, even though in the last 12-18 months, it’s been extremely active. They’re doing pretty well as far as pre-sales are concerned.
What’s the status of Metro at Tysons?
Well, some are hoping construction could start in Tysons late this year, which would bring a whole new dimension. But there’s a lot of heavy lifting yet to be done. The newest element is that the Metropolitan Washington Airports Authority has indicated an interest in funding a rail line from Tysons to Dulles. That could really speed up the timeline. The project until now has been contemplated in two phases. Phase one would start from West Falls Church through Tysons out the Toll Road to Wiehle Avenue, and Phase Two would take the rail from there to the airport. MWAA is concerned that if it’s built out to Wiehle in one phase, it might never get the funding to get all the way to the airport. So they’ve offered the Commonwealth to take over the whole rail project and do it all at one time. They’ve made a proposal to the governor, who has said he sees some favorable things and will take a look at it. We’re in the middle of the legislative session in Richmond, so we may know something soon.
How and where exactly would Metro affect Tysons?
If rail is built sooner, the Tysons market will benefit sooner. There would be four stops in Tysons, beginning on Route 123 near Capital One. The line would then go up 123 and another station would be near Circuit City and La Madeline adjacent to the mall. Then it would take a right turn at Route 7 and stop near Koons, then go straight out 7 and stop near the Sheraton. Then it would hook a left and go out the Toll Road to Wiehle. Some would be underground, some above ground. If rail comes along that route, you’ll see a lot of increased density at rail stations in Tysons, in terms of residential, offices, and retail. This is all part of a bigger plan to make Tysons more pedestrian-friendly and get cars off the road. There’s a big study going on now being headed by Kate Hanley [former chairman of the Fairfax County Board of Supervisors] called the Tysons Task Force, meeting with different groups. The idea is to make Tysons into a true work/live/play 18-hour environment, not unlike what Arlington County has done in the Rossyly-Ballston corridor, which is a good model. This involves a tremendous amount of work, and rail is a big piece.
On a scale of 1-10, how strong is Tysons?
I would give it a 7. I think we all wish demand was a little bit better in the A- and B class product. If they’re successful in revitalizing, in a few year we could reshape it into totally into a 10.
Is Tysons still considered the premium area for locating in Northern Virginia?
I think it depends on your industry. There was the day when we all considered Tysons to be the downtown of Northern Virginia, and the legal and financial services communities always felt they needed to plant their flag in Tysons to make a statement in Northern Virginia. That changed with the tech community. They really hop-scotched over Tysons and planted their flag out along the Dulles toll road. So there’s variation now.
How about Westfields, where you spend time?
Westfields is a market that’s been driven by the National Reconnaissance Office, which is a one million sq. ft. government agency that is on Route 28, south of the airport, but north of I-66. Actually, there are two sides of Westfields, one being east of 28 and one west of 28. The NRO is located west of 28, and that side is a little more dynamic. You’re seeing spec development there because of demand, because the subs to the NRO are growing, because the contracts for defense and intelligence work are continuing to flow downstream, and driving jobs which, in turn, drive growth, which drives the demand for space. So there’s quite a bit going on down there in the way of either saber-rattling to do spec development, or groups that have actually put a shovel in the ground without a tenant commitment. In addition to being close to the National Reconnaissance Office, it’s out there in western Fairfax County, fairly close to Prince William, closer to a lot of employee bases for companies. That means the commute is not as bad, and there’s been tremendous road improvement done on 28 recently, such as fly-over interchanges on 28 which have been funded in part by a special tax district. So there’s really been good transportation and infrastructure improvement done out there. That, coupled with government agencies that are growing, has really fueled that market.
Any well-known companies locating there?
Northrop Grumman and Lockheed Martin has a major presence out there, as does a company called Scitor, and Rolls Royce has its North American headquarters. Then you’ve got a number of good name companies with a smaller presence.
What does a square foot of office space sell for?
It’s all over the board and depends on a lot of things. There was a vacant building out there that traded recently for $130 a foot, but a building that was fully leased traded shortly thereafter for $270 a square foot.
How about the Dulles Toll Road?
You’re actually seeing the possibility of speculative development happening on the Dulles Toll Road again. Boston Properties is getting ready to start new buildings in Reston Town Center, and I’m told they have a couple of leases in-hand, pre-leases totaling the better part of 100,000 square feet. So they’ll be looking to put another building up out there, and that again speaks to the trophy class level, a market unto itself. Washington Real Estate Investment Trust is also going spec on Dulles Station in Herndon, and should beat the other competition to the market. You’re looking at vacancy rates that are in the low double-digits and people are feeling, “Hey, this might be time to go spec on the buildings because demand is pretty decent and there’s not a whole lot left out there to lease.”
What about Gainesville, Haymarket, and Manassas?
I see those as great future growth areas for Northern Virginia. The residential piece is already in place, and retail has followed. Employers, including the federal government, are actively looking to put facilities closer to their labor pool as a way to shorten horrible commutes and increase productivity by creating happier workers. We are involved in numerous multi-dimensional transactions involving land sales as well as retail, industrial, and office leasing in these markets.
Other areas where you’re bullish?
The I-81 market from Harrisburg, Pennsylvania to Harrisonburg, Virginia. The I-95 market down through Stafford and Spotsylvania counties. BRAC will move employers and the government from the traditional close-in markets further out to the exurbs, and infrastructure improvements will have to be put in place to avoid the transportation tie-ups we are dealing with now in Fairfax, Loudoun and Arlington counties. Traditional powerhouse submarkets such as Tysons Corner and the Dulles Corridor will have to get their act together to retain firms which may see outlying areas in Prince William County as viable options.
But what about roads there?
I-81 absolutely has to be widened. It’s two lanes in each direction, all trucks and dangerous. Something has to be done to keep the flow going. That’s the one thing that could choke that market. That’s all part of the transportation package being discussed in Richmond, whether it ends up being the $1 billion plan of the Governor and the Senate, or the more conservative House plan.
Who is Grubb & Ellis’ competition?
We are one of the three truly national commercial brokerage firms, the others being CB and Cushman. We are not on the development side of the equation, and we don’t specialize in just tenant representation. We do all aspects of commercial brokerage.
How do you compare with a company like Jones Lang?
Jones Lang does more consulting work at a higher level than we do. That obviously results in transactions downstream. They’ve got enormous contracts with DoD, and they’re also one of GSA’s four service providers, and they have a lot of consulting contracts at a very high level in the private sector. We’re more transaction-based, we certainly have corporate and strategic accounts, but we don’t have the consulting bent they do.
What do you make of their acquisition of Spaulding & Slye?
I think that’s a very interesting move that will bode well for both firms, especially here in Washington, D.C. I think it was done mostly as a way for Jones Lang to get into Boston, a market they had had a tough time entering. Spaulding was started in Boston. But here in Washington, it also makes them a much more formidable competitor. There ultimately may be some shakeout of talent and individuals. We’re going to just have to see if and when that happens, but it’s just another example of the big guys getting bigger.
You got mobilized for Iraq at the beginning of the war.
Yes, for six months at the outset of Operation Iraqi Freedom. I didn’t go overseas, but was stationed in the Pentagon. I’m an intelligence officer by training, so I was working in something called a Joint Inter-Agency Task Force that involved the DoD, FBI, and CIA.
What did you learn from the Marines that you apply to real estate?
When you boil it all down, being a Marine officer teaches you two principles in particular: never ask anyone to do anything you wouldn’t be willing to do yourself, and always put your people first. The first concept means that when you task someone or delegate a job, it should be important and worthy, not something done for the sake of exercising control. Putting people first does not mean being a follower. The irony with leading brokers is that you are, by definition, their boss yet you are really working for them. But I believe all brokers see the need to have a leader in their office.
Why did you come to DC from the Marines in 1985?
I got off active duty and moved up here because I had a friend from college who was from Alexandria and went to work for CB, and he said, “Hey, let me tell you what I do for a living,” and it sounded fascinating. I started interviewing with commercial real estate companies and got hired on by Smithy Braedon. I went over to Barrueta and Associates about a year later when they were formed by Fern Barrueta, and then I moved over to Grubb in 1990.
Still in the Reserves?
Yes, I’m with the Marine Corps Recruiting Command, so what I’m doing now is helping recruiters throughout a district that covers DC, Maryland, and Virginia and about three or four other states. I oversee about a dozen reservists that are helping active-duty Marine Corps recruiters in their mission. But I plan to hang it up in 2006. I’ll have 3 years in-grade as a colonel, and 26 years is a pretty nice run.
Congratulations. Now you can be a full-time real estate warrior! :)