Swedish Developer Begins Downtown D.C. Office Project On Spec
New office development has slowed during the coronavirus pandemic and economic crisis, but one Swedish real estate firm is moving forward with a spec project in Downtown D.C.
JLL's Doug Mueller, Evan Behr and Mac Hall are working with the developer to lease the project, which is expected to deliver in the second quarter of 2021. Akelius is self-financing the spec project without taking on a loan.
"Real estate always has lead time, and this is going to take until Q2 of 2021 to finish, so we've got time," Mueller said. "Their bet, after a lot of discussion, is that people are going to come back to work differently, and this building in our mind is a building that fits that."
The project is a redevelopment of a four-story building next to the National City Christian Church. The developer will add a fifth floor and a penthouse amenity space to the building, which previously housed church functions. The church will continue to operate in the main building at 5 Thomas Circle NW.
The site's redevelopment had previously been planned by Rock Creek Property Group, but Akelius reached a deal to acquire the property last year, Mueller said. Mueller said Akelius is considering moving its own office into one of the building's five floors, but it is willing to lease the full building if it can find a tenant.
The team is seeking rents in the $65/SF to $70/SF range. Mueller said he expects to receive interest from homegrown technology companies, associations, corporate government affairs offices and boutique law firms.
He said the building should appeal to tenants that are rethinking their office environment during the pandemic, as it has elements like a new HVAC system, operable windows and touchless elevators. It also has amenities including a conference center, fitness center and rooftop deck. Architecture firm Perkins and Will is working with the developer on the project's design.
"It is the perfect post-COVID building," Mueller said. "It has high ceilings, operable windows, state-of-the-art HVAC, all the bells and whistles, all the amenities, but it still has a really cool, authentic vibe."
Mueller said he has seen leasing activity continue to increase in the D.C. area since the pandemic froze the market in March.
"Relative to other markets, D.C. has fared exceptionally well," Mueller said. "We've been very lucky. The tenant mix is very diverse and with the countercyclical nature, even in a post-pandemic world it feels like a large number of D.C. tenants are deciding to move forward."