When to Tear a Building Down
Older suburban office buildings are languishing. Does it ever reach a point when owners should just start over?
Bob Murphy (snapped speaking before 600 at our Bisnow DC State of Office summit Tuesday at the Willard) and MRP Realty don't have this problem—they have new and well-located product. (In fact, $900M in development underway, including 900 G St downtown and Tysons Overlook next to the Gannett headquarters in Tysons.) But Bob says even well-capitalized firms are not immune to slow government leasing and job growth. Some owners may choose to simply demolish obsolete buildings in place of new office or residential, but if a building isn't well-located, even that may not help in the long run.
Brookfield Office Properties (and DC leasing chief Dave Bevirt, right, with Cushman & Wakefield's Brian Dawson) was lucky to have a well-located obsolete building, 2001 M St. The former regional HQ of KPMG was, in Dave's words, "a very ugly, granite-clad building," but sits at a prime downtown intersection within walking distance of several Metro lines. So he says Brookfield jumped at the chance to add 60k SF to the property and redevelop it into a glass jewel, and hopes that its Q1 '16 delivery times right in line with the big wave of law firm expirations happening then. Adds Dave: "The building is designed for law firms."