What dying office parks are doing to Montgomery County
Montgomery County officials had a feeling all was not well with their office parks.
Some major employers, including government contractors and federal agencies, had departed such campuses in the suburban Maryland county in recent years. Marriott International said it planned to do the same.
There were myriad news stories saying millennials and other employees didn’t want to work in carefully manicured locations far from public transit.
So the county Planning Department commissioned a report to see how bad things really are. The answer, in short: bad. Completed last week, the report found that Montgomery’s office market has been battered by economic factors big and small. It is home to a shrinking portion of Washington-area jobs. It is at risk of losing more federal agencies this year. There are a dozen buildings that are completely empty, and some of them have such dim prospects that they may have to be turned into housing, schools or churches.
“We knew there was a problem,” said Gwen Wright, the county’s planning director. “We knew that there were issues and problems, and this study is helping us clearly define them . . . it begins to offer some ideas.”
Some of the problems identified by the report’s authors, from the District consulting firm Partners for Economic Solutions, aren’t unique to Montgomery.
Office parks around the region — and the country — have been struggling in recent years as companies move to walkable locations near amenities and public transit. In Fairfax County, long considered the region’s economic darling, some properties in more removed locations have lost more than half their value. One drew so little interest from companies looking to lease space that it was converted into an elementary school.
In addition, employers in nearly every sector, led by the federal government, are using less office space per employee, contributing to high vacancies even when the region adds jobs.
“A big factor is simply that people are working differently than they used to,” Wright said.
Theremay be more tough news on the horizon, as the General Services Administration, which manages real estate for the federal government, has nearly 2.4 million square feet of space in the county under leases that expire this year.
Some of those deals have been extended, but generally for 10 or 25 percent less space than the tenants previously occupied. Over the next few years, 1.6 million square feet of expiring GSA space is up in the air, according to the report.
“All told, GSA actions could reduce Montgomery County’s private office space occupancy by roughly 1.1 million square feet over the next five years,” the report says.
As in other regions, some of the hardest-hit areas of Montgomery County are older office buildings best accessible by car and far from the bustling urban areas in downtown Bethesda and Silver Spring. Nineteen vacant or so on to-empty buildings are located outside the Beltway.
Four empty buildings are clustered along Rock Spring Drive and Executive Boulevard in North Bethesda. Seven buildings that are either empty or expected to empty are in the Shady Grove Life Sciences Park.
Doug Firstenberg, a principal at Stone bridge Carras, a developer active in Bethesda and Silver Spring, said the county needs to create incentives aimed at getting owners of office parks to try something new.
“One of biggest challenges is that 1980s, successful classic suburban development in Rock Spring and the [Interstate-270] corridor may have insurmountable challenges to re-gear and meet current market demand for Metro, mixed-use environments, amenities and walkability,” Firstenberg said in an e-mail. “Repurposing these through incentives and flexibility for other uses will make a big difference to the office market.”