What dy­ing of­fice parks are do­ing to Mont­gomery County

The Washington Post Sunday - - CAPITAL BUSINESS - BY JONATHAN O’CON­NELL jonathan.o’con­nell@wash­post.com

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.”

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