Consolidations in the DC Metro Area Offer Some Clarity Regarding the Future of the Region's Office Market

08/06/2014

Washington, D.C. office blog, D.C. office statistics, Cassidy Turley

The Washington, DC Metropolitan Region (DC Metro) got a small dose of clarity in recent days with the announcement by the General Services Administration (GSA) – the leasing arm of most of the federal government – that the hunt for landing the 2.1 million square foot Federal Bureau of Investigation headquarters is down to three sites.Two are in Prince George’s County, Maryland (Greenbelt or Landover) and one is in Springfield, Fairfax County, Virginia. A final decision is expected in late 2015 – expect a ton of lobbying from politicians in both states in an effort to land the HQ in their district between now and then.

Despite the press the FBI relocation is getting, this is by no means the only large federal consolidation in the market. In an effort to save taxpayer money amid the scandal that plagued the GSA for the past several years, the GSA has an ongoing commitment to get costs under control. Collapsing several leases into one large lease or a move to an owned property is one way the GSA hopes achieve those savings. The following are a few more large requirements at some stage of consolidation in the DC Metro region:

DEPARTMENT	Description	TARGET AREA	SF REQUIRED
Homeland Security	FEMA	SE Washington, DC	1,700,000
Homeland Security	Cybersecurity Campus	National Capitol Region	600,000
Homeland Security	Transportation Safety Administration	Northern Virginia	625,000
Justice	U.S. Marshalls	Northern Virginia	371,000
Justice	Consolidation	District of Columbia	839,000
Education	Consolidation	District of Columbia	290,000
Smithsonian	Consolidation	National Capitol Region	550,000
Health and Human Services	National Institutes of Health Replacement Lease	Suburban Maryland	345,000

While on the surface, all this activity in the pipeline seems like good news for the region, many of these requirements will be looking to move to either existing owned space or newly constructed built to suit office buildings. This and the fact that the efficiency quotient is having these tenants leaving behind more space than they are taking anew has most thinking that there will not be a huge impact on the elevated vacancy rate being experienced throughout the DC Metro market. Further complicating matters is that more of these types of deals have seen short term extensions for one or two cycles before the ultimate consolidation takes place in an effort to buy time until real long term fixes can be found. Despite this, with over half of the entire DC Metro region’s 54 msf GSA leased portfolio rolling by the end of 2017, those owners that can meet GSA standards for new leases – including proximity to mass transit, cost ($50 FS or below in DC, $39 FS or below in VA, and $35 FS or below in MD) and energy efficiency in a floor plate that allows the agency to achieve aggressive space use standards – should reap the reward of landing a big one.

By: Nathan Edwards

Director of Research, Cassidy Turley - Washington, D.C.

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