SILVER SPRING, MD–Much to Montgomery County's sorrow, Discovery Communications has announced it will relocate its global headquarters to New York City next year. It plans to sell its headquarters in downtown Silver Spring and has retained JLL's Capital Markets Group to market the 540,000-square foot building. Some jobs will remain in Maryland, according to a statement by George Leventhal, an at-large member of the Montgomery County Council, “but the number is not known right now.”
The news cannot be described as anything but a blow to the submarket, albeit with one distant silver lining. “It is a significant setback for Silver Spring, which has seemed to just be on the cusp of a breakthrough,” Sandy Paul, senior managing director of National Research of Newmark Knight Frank, tells GlobeSt.com. “It has grown somewhat consistently over the years but has also had its share of challenges in attracting the big names that went elsewhere in Montgomery County.”
Silver Spring's current vacancy rate is 12.4%, according to Paul. When Discovery vacates its headquarters the vacancy rate will rise to 17.8%, assuming there is no backfilling of space. For suburban Maryland, Discovery's departure will lead to a 70 basis point increase in the vacancy rate, he adds, rising to 16.9% from the current 16.2%.
One silver lining to Discovery's decision is that it could lead to a more concerted effort to develop the transit nodes around the Purple Line, including the one that will be opening in Silver Spring, Paul said. At NKF's Benchmarks 2017, Maryland Gov. Hogan urged developers to invest in the Purple Line transit stations,
Paul noted.
But that, admittedly is a long ways off. In the short term, Paul says, “this is a big hit to the submarket.”
The decision is also a reminder that economic incentives are playing an increasingly important role with commercial real estate, Paul adds. “We know Montgomery County stepped up to offer incentives but I will be curious to see what Discovery ended up getting from New York.”
As for Silver Spring, according to Leventhal, “the Maryland Department of Commerce and Montgomery County Economic Development Corporation will provide support by working with site selectors and corporate relocation decision makers to find new occupants for the property.”
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
