DC-Area Brokers and Owners Adopt New Leasing Strategies Amid COVID
Office leasing in Washington, Baltimore and pretty much nationwide has been on the decline since the start of the pandemic, and owners have had to adjust their leasing strategies in both marketing their properties and showing them to potential lessees.
Because of the uncertainty surrounding COVID-19 and no true way to know when companies will be back to work full-time in office space, rents are softening, and extensions are few and far between.
Andy Eichberg, Stream Realty Partners’ executive vice president, noted that other than the obvious economic challenges and limited tenant demand, leasing brokerages must continually work to find new and better ways to effectively communicate right now.
“With people in varied stages of getting back to work, and most people suffering from ‘Zoom fatigue,’ maintaining relationships with clients, other brokers, tenants, co-workers continues to be a challenge for everyone,” he told Commercial Observer.
Stream Realty Partners is providing leasing services for two trophy office buildings in downtown Washington, D.C.: 1601 K Street, an 11-story, 217,000-square-foot building, and Lafayette Tower, a 245,000-square-foot building.
“From a marketing and tenant outreach perspective, we are leveraging technology more than ever to create better virtual tours and presentation capabilities, which I expect will continue to be effective tools post-COVID,” Eichberg said. “In addition, given the lack of depth in the active tenant market, we have been using more profound analytics to effectively track and assess the market to provide guidance during this unusual time. That said, nothing replaces hard work and creativity, so we continue to push hard to create opportunities for our clients.”
While he knows things won’t get back to a true normal until there is a vaccine, Eichberg’s cautiously optimistic that the market will start to show some upward trending as more tenants get back to work later this year and early next year.
“We will continue to attract tenants to our available spaces by addressing flexibility and environmental and safety concerns throughout the end of the year and into 2021,” Eichberg said.
Boston Properties is ramping up its efforts to attract new tenants to D.C.’s Metropolitan Square, which recently underwent a $60 million renovation.
Located at 655 15th Street NW, the 12-story building is across from the Treasury and the White House, and is considered prime office space.
“In-person tours are difficult but not impossible to manage,” Jake Stroman, the firm’s senior vice president of leasing, told CO. “Ensuring tour attendees are following BXP’s social distancing and personal protective equipment rules and regulations is paramount. The entire experience is different, and we find it useful to highlight to prospective customers just how important it is for our team to ensure a safe and healthy workplace for our customers, vendors and employees.”
In recent months, BXP’s leasing strategy has shifted to hosting more virtual presentations, creating more virtual content, and even negotiating and signing leases virtually.
“In fact, we just closed a deal with a large customer in Reston Town Center that was done completely virtual—from the initial tour to the signing of the lease,” Stroman said. “As with everyone else in the industry, we continue to look for ways to ensure our incredible properties are showcased to meet the requirements of customers in our markets.”
Philippe Lanier, principal at EastBanc, noted the company has adjusted its leasing strategy because of COVID to bypass what he said became “a senseless competition in concession packages.”
“Rather than offer upfront incentives to bring in new tenants at low upfront cost, we have been focusing on pre-investing in buildout packages in smaller spec suite offerings, reducing rent, reducing the transaction cost, and offering either shorter-term leases with extensions or easy break clauses to provide flexibility and predictability to tenants,” he told CO. “It’s been working well and we are confident in our approach.”
For instance, at 1875 Pennsylvania Avenue, EastBanc is offering an entire trophy building with excellent finishes with no concessions and a low rent that is effectively half the market face rent in other properties.
“For a prime address and property, that is very compelling and is generating tremendous activity,” Lanier said.
Additionally, the firm has been working with Cushman & Wakefield at 1875 Pennsylvania Avenue at a triple-net rental rate of about $29 per square foot, compared to the traditional rate of $65 per square foot, essentially building the traditional concessions and free rent into the low rent offer.
“It’s clearly a challenge to all business leaders to estimate their space needs as they evaluate the balance of remote work vs. an in-person office experience,” Lanier said. “While this is a very real phenomenon, we are confident that the need to collaborate in person, provide mentorship to colleagues, and provide employees work-life balance all lend themselves to a continued need for office space for most businesses. We appreciate, however, that this conclusion will not be reached by every tenant and not all at the same time. There is a long road ahead to adjust.”
The Cushman & Wakefield team of Douglas Brinkley, Matt Melnick and Lizzy Sweeney were recently named the exclusive leasing agency for Corporate Place, the largest block of Class A office space in White Marsh, Md, northeast of Baltimore.
The property consists of 155,790 square feet of office space with a full-building availability of 79,000 square feet at 8110 Corporate Drive and an additional 6,587 square feet available for lease at 8140 Corporate Drive.
“This is the finest product in White Marsh proper,” Brinkley told CO. “Nottingham Properties, the master developer, set aside these lots for their most visible low-rise multi-story product. The suburban location, open surface parking lot and low-rise nature of this building makes this location more attractive to firms looking to provide a safe environment.”
Due to COVID, the team has been utilizing resources such as Matterport and virtual tours.
“When appropriate, we are advising investor clients to build spec spaces—less than 5,000 square feet—and offer flexible lease terms,” Sweeney said. “Showing space has become more difficult, so we need to make sure that proper safety precautions are maintained—safety masks, hand sanitizer stations, social distancing, etc., so that prospects feel safe when touring.”
Katie Yanushonis, senior vice president at the Meridian Group, noted that given the relatively limited leasing activity across all submarkets, the firm is assuming more downtime than it would otherwise have anticipated.
“In addition to how we’ve adjusted our assumptions, we’ve been putting a much greater emphasis on virtual marketing to ensure we can market our buildings through virtual tours and presentations,” she told CO.
For instance, Meridian is now using Matterport and other virtual touring tools for its assets so that a broker or prospective tenant can walk through the space from the comfort of home.
Still, technology can’t replace face-to-face communications, brokers say.
“While technology has been incredibly useful in this remote working environment, it is not 100 percent reliable,” Yanushonis said. “I’ve heard of plenty of instances where the presenter can’t log into the meeting, or someone’s internet is spotty and they get cut off mid-sentence.”
Across the firm’s portfolio—including the mixed-use Boro complex in Tysons, Va..—the company has also refocused and expanded its tenant experience platform to include virtual services and programs.
“Through our partnership with cove, we introduced cove@Home, a seamless way for our tenants at the Boro and other offices across the DMV (District of Columbia, Maryland, Virginia) to support their employees with perk packs, workspace upgrades, and cultivate a strong sense of community that will keep teams productive and engaged in this trying time,” Yanushonis said. “Meridian is known for its creativity and dealmaking, and that is more important now than ever before, particularly in this more challenging leasing environment. We will continue to design and implement great virtual marketing campaigns, while also focusing on unique ways to make sure our tenants and surrounding neighbors feel comfortable coming back to the Boro.”