Inside The Tumultuous Transition In Montgomery County
Montgomery County, like all of DC’s suburbs, is in a time of great transition. But as the aging population and office stock lags behind DC and NoVa, and as its biggest private employer plans to move, the future is looking a little murkier.
During a keynote interview in front of 600 of the county’s commercial real estate pros at Bisnow’s Montgomery County State of the Market yesterday, County executive Ike Leggett had strong words about the world’s biggest hotel company’s upcoming move. Here's Ike (right) being interviewed by Buchanan Partners founder Bob Buchanan.
“Marriott’s going to stay in Montgomery County,” he said. “That’s my promise and it’s going to happen.”
We’ll reportedly find out by the end of this year. While those are strong words from the county’s top politician, the developers on the panels were optimistic, but not certain.
Friends of White Flint executive director Amy Ginsburg, sitting with Saul Centers SVP Brian Downie on her left and Monument Realty EVP Doug Olson and Federal Realty Investment Partners EVP Chris Weilminster (holding the mic) on her right, says she is pushing hard to bring Marriott to the Pike District, the re-branded White Flint, launching a “Pick the Pike” campaign.
“We have everything they need,” Amy said. “They will be able to make the district in their own image, and that’s something every company wants.”
StonebridgeCarras principal Doug Firstenberg said Marriott is symbolic, but after the $60M economic development package DC threw at the Advisory Board for an office footprint about 60% of the size Marriott’s expected to require, the District is a real threat.
Carr Properties CEO Oliver Carr III said it’s not a foregone conclusion the hotel giant will stay in Montgomery County. “It’s a good bet, but it’s game on. The county and state need to be competitive with Virginia and DC. Those jurisdictions are on them every day. And Montgomery County has to play to win.”
Already winning: Chris and Federal Realty Investment Trust, whose Pike & Rose development has created a blueprint for remodeling the car-oriented suburb—particularly along Rockville Pike—into a destination for retail, office and multifamily.
Pike & Rose built its first phase of office on spec, and it’s now 100% leased. Monument Realty owns probably the largest block of empty office space in the county, Doug Olson told the crowd, but Pike & Rose makes him feel a lot better about that notion.
“The vacancy today, coupled with what Chris is doing at Pike and Rose, really is opportunity,” Doug said. “People say, ‘I’m sorry Doug.’ Don’t be sorry, because what Chris is doing down the street is creating value. “
Doug is renovating parts of Monument’s old office stock into Class-A office space, and offering rents at a 30% discount to Pike & Rose’s premium space. “Call it Class-A office space at Class-B pricing,” he said.
The Pike panel was moderated by Alvarez & Marsal managing partner Tyler Horton on the left. Brian said he’s optimistic the Pike District’s future is bright, because developers control large tracts of land already, and can build big projects that make sense.
“Federal Realty has 30 acres at Pike & Rose. WMATA has 30 acres. Lerner has 50 acres in White Flint. JBG controls 13, 14, 15 acres. We’ve got seven or eight,” Brian said. “You’ve got these products that create a critical mass. We have the opportunity to make the Pike District tremendous.“
And while optimism permeated the Rockville Pike panel, the executive outlook panel with moderator Scott Wallace of Linowes and Blocher, Oliver, Doug Firstenberg, Fougler-Pratt president of development Brigg Bunker, 1788 Holdings principal Larry Goodwin and Percontee EVP Jonathan Genn was mixed.
“There are significantly fewer people sniffing around the county right now than other areas,” Brigg said. “People are making a choice to go to other areas for a reason.”
That reason is an anti-business perception the county has had for years. The panel, to a man, says the county has been a great partner for their recent business, but there’s no question the government still has work to do.
“You’ve got to come up with new tools and give them reason to be here,” Doug said. “You do some things great, but you can’t stop. If you do, you’re going to have a commercial shortage here. We’ve still got a long way to go.”
On the multifamily side, things are looking more promising. Doug Firstenberg just opened The Darcy and The Flats with PN Hoffman, and despite the lack of Millennial renters/buyers for the condo and apartment mix, he was happy with the rate at which the building is filling up. Larry said the lack of Millennials isn’t a problem, it’s an opportunity. Sound familiar?
“The senior living statistics are off the charts in Montgomery County,” he said. “There are a lot of people looking to get out of their houses, some into condos, a lot into rentals.”
But Millennials were still a present topic of conversation. Chris made no bones about courting them at Pike & Rose, while Doug Olson called them overrated.
“Who cares?” he asked. “Why do we talk about Millennials all the time? These guys represent 15-20% of the whole market? We don’t build for a target that narrow because it’s too dangerous.”
But, like it or not, Millennials represent the innovation economy Jonathan says is the future of the county. Ike is courting cybersecurity companies in anticipation of the 1,000% growth that industry is expected to undergo in the next 10 years, and tech workers tend to skew much younger than MoCo’s current demographics. Jonathan talked about “expanding the pie” that is the DC region’s office market to get those types of workers.
“When we expand the pie, we won’t be talking just about Marriott,” he said. “The next Marriott employer may not have been invented yet.”