Exclusive: Spaces Leases Top 3 Floors At Downtown D.C. Building GSA Recently Vacated
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The $36M renovation a Downtown D.C. landlord launched on its 30-year-old office building after the federal government vacated has started to pay off.
Coworking operator Spaces has signed on to take the top three floors totaling 51K SF at 1441 L St. NW, continuing the coworking sector's rapid growth in the D.C. market.
The Bureau of Economic Analysis, a federal agency whose leasing is managed by the General Services Administration, had occupied the building for 23 years until 2016, when it moved to the Suitland Federal Center in Prince George's County. The building's owner, S.C. Herman, then launched a $36M renovation that added two floors and a penthouse and revamped the building's lobby and amenities. The building was constructed in 1967, acquired by S.C. Herman in 1988 and last renovated in 1992, right before BEA moved in.
JLL's Nathan Beach, Evan Behr, Doug Mueller and Seth Bernard represented the landlord in the deal. JLL's Kevin Brant represented Spaces, a subsidiary of IWG, formerly Regus. S.C. Herman owns six D.C. properties, one in Virginia and one in Delaware. As a long-term holder, Beach said the landlord wanted to go the extra mile to improve the property and make it competitive with the new office product delivering in the city.
The renovation, designed by DEP Designs, added two floors and an indoor-outdoor penthouse, which Spaces took a portion of for private use. It also re-skinned the building with a floor-to-ceiling glass facade, installed a new HVAC system and revamped the lobby, elevators and other common areas. New amenities include a lobby-level conference center and a two-story fitness facility with lockers and showers, plus a bike storage facility.
IWG Vice President of Network Development for the Americas Michael Berretta said the renovation played a big part in Spaces' decision to sign a lease at 1441 L, coupled with the building's location.
"We were looking to get some presence up on that side right around Thomas Circle," Berretta said. "It's kind of an obvious choice from a standpoint of amenities with restaurants and things like that. It's got a really good vibe, a great community and a lot of activity."
The 1441 L building still has 140K SF remaining to lease, with its renovation slated to be complete in November. Beach said the building has gotten strong interest from other companies, and he thinks signing the coworking provider could lead more prospective tenants to commit.
"They see it as a quasi-amenity, it provides built-in space for growth if they have a contract and need to ramp up," Beach said. "More than anything, the energy they bring to the building just shows it is different."
Beach said the building is renting in the high-$50/SF to low-$60/SF range, making it more affordable than the city's new trophy office buildings.
"It's a very unique position in the market," Beach said. "We're not a B building, but we're not trying to trick the market and say we're a super trophy. We're well-positioned from a price standpoint."
The deal is the fifth for Spaces in the D.C. region. The coworking provider in January signed on as the first tenant at Comstock's Reston Station and in October signed a lease at JBG Smith's Chase Tower in Maryland, just over the D.C. line. Its first two locations opened at NoMa's Uline Arena and the former Artisphere space in Rosslyn.
The growth is part of a global expansion for the Spaces brand, and Berretta said D.C.'s office market fits well with its vision.
"D.C. in particular is interesting because it has a lot of adaptive reuse like Uline and buildings that are being completely renovated and brought up to today's standards with outdoor patios and rooftop balconies," Berretta said. "You're seeing products that are really interesting with a lot of amenities that focus on the experience of customers."
Spaces is just one of several coworking companies growing their D.C. presence as the sector continues to drive the region's office market. Industry leader WeWork earlier this year leased three more floors in Chinatown and in March it announced plans to open its first college campus location at the University of Maryland in College Park.
Industrious has also been growing quickly, signing deals in Thomas Circle, Bethesda and Ballston and aiming to open eight D.C.-area spaces by next year. Israeli coworking company Mindspace in December picked D.C. as one of its first two U.S. locations, and New York-based Bond Collective in June signed its first D.C. deal on H Street.
Berretta said IWG plans to continue to grow Spaces' footprint in the D.C. region and bring in more of its workspace brands. The company also owns Regus, No18, OpenOffice, Basepoint and Signature.
"We see emerging neighborhoods we'll want to be in, and we'll also be diversifying our product lines with different brands," Berretta said.