Investors have renewed their interest in office properties in the Washington, D.C. central business district (CBD) based on increasing tenant demand. The market is putting a higher value on the built-in amenities that exist in the CBD, like dining and entertaining options, transportation accessibility and architecturally timeless buildings.
We can always tell the center of gravity of a city by where the brokerage shops locate. In D.C., CBRE’s latest move to the CBD from the East End puts all of the agency brokerage shops within feet of each other. With a healthy stock of historically significant, well-built office properties with value-add potential, the CBD is primed to continue its office renaissance.
Transportation Infrastructure
While the existing public transportation infrastructure in the CBD is an important factor driving businesses back to the submarket, shaving 20 to 30 minutes from commute times — whether by car, bus or train — is decidedly attractive to today’s employers. Combined with the variety of established dining, entertainment and hospitality options in the CBD, transportation is vital to attracting high-profile employers. The city’s law firms in particular have taken note. Over 20 notable practices have relocated their offices to the CBD in the last year alone.
Craig Deitelzweig, Marx Realty
As transportation infrastructure evolves and improves in and around the District and mass transit carries more workers from farther-flung suburban enclaves, it’s never been more important for firms to be near transit hubs and accessible to commuters traveling by car.
The office sector is seeing the pendulum swing in the direction of the CBD with one significant common thread: convenience. Attracting and retaining top talent in Washington, D.C., is weighted much more toward ease of access than having an address in what might be perceived as a “hip” neighborhood.
Repositioning Past for Future
The CBD offers a wide variety of properties that are ripe for repositioning as existing buildings are increasingly the investment darlings of the office sector. Marx Realty provides hotel-like amenities in office settings across the country, which adds value to properties.
Thanks to a small change to the Height Act and amendments to the city’s zoning laws in 2016 that allow habitable space on the penthouse level, office buildings in the District are being creative with rooftop terraces and penthouses. These office and conference spaces offer modern video conferencing capabilities. The ability to incorporate a stylized rooftop lounge and conference space to an office building can be a big draw for tenants.
A New Generation
Rockrose Development’s repositioning of 1776 Eye St. N.W. in the CBD is indicative of the type of product that is desired by today’s office tenants. The building has distinctive architecture with Pei Tan’s signature light fins, a fitness center that has natural light, curated art walls and a rooftop terrace with a basketball court. That level of detail combined with design elements and sensible amenities top the wish list of today’s tenants. Thus, office building owners are incorporating carefully curated options in new and existing spaces.
Hospitality-driven amenities such as lounge spaces and outdoor terraces that encourage interactions among tenants and their guests are extremely important to office tenants. Today’s workforce demands thoughtful amenities that make sense. Ping pong tables, golf simulators and beer taps are giving way to sophisticated amenities that employees and employers find most attractive, including club-like lounges, oversized conference spaces and outdoor terraces reminiscent of Gatsby-era garden parties.
Corporate interest in returning to the CBD will ultimately drive a flight to quality. It is increasingly important to create properties with tangible benefits from the office spaces themselves and a hospitality-like vibe throughout the building, including the built-in neighborhood amenities that give employees places to congregate during lunch and beyond.
— Craig Deitelzweig, President and CEO, Marx Realty. This article originally appeared in the November 2018 issue of Southeast Real Estate Business.