Does your building need a makeover? According to panelists at our Repositioning Summit yesterday, you better be prepared to overdo the facelift.
At the Willard, First Potomac CEO Doug Donatelli said that pre-leasing an existing building, even if it goes through a full renovation, is much tougher than with a new property. Until tenants see the finished product, they sometimes don't believe plans will come to fruition, he says, noting that pre-leasing for two First Potomac projects—440 First St and Three Flint Hill in Fairfax—was "almost nonexistent." But going all out in both renovations, from a huge new conference center at Three Flint Hill to new high ceilings and column-free space at 440 First, won many tenants.
FOX Architects' JP Spickler, who's worked on big-time repositions like Doug's 440 First St and Lowe Enterprises' 1400 Crystal Dr in Crystal City, says the market needs to perceive a redeveloped property as a brand-new building, meaning a thorough job from design to systems is a must. Noting 440 First's recent LEED Platinum win, JP also says that repositions can be more efficient than you think: "Sometimes the greenest building might be the one already built." (Sounds like something Yoda would say if he were trying to lease space on the Millennium Falcon.)
Transwestern's Pete Prominski says DC's 8.8% vacancy rate (9.4% with subleases, 100% with the realization that we're all just here temporarily and can anyone really "stay" anywhere) is 300 bps higher than where we were a year ago, meaning competition for tenants will only heat up: "If you're not proactively fixing buildings, you're dead in the water," says Pete, who adds that spec suites have been a huge help in keeping the market going, especially for the "bread and butter" base of smaller tenants in the market.
Trust for the National Mall senior project director Teresa Durkin gave an update on what will change in the years to come: the gardens will return to Constitution Gardens, the Lockkeeper's House will be restored and relocated, and the Trust hopes to activate the Mall at night, too. The Trust's annual benefit luncheon arrives May 1, Teresa says. Stay tuned for more repositioning coverage on Monday.