85,000 SF of Trophy Space Coming to Market

WASHINGTON, DC-The DC market is about to see whether the emerging trends characterizing the local trophy market will continue through this year and next: There is a large block of space at Liberty Place coming to market this year and next for a total of 85,000 square feet to 90,000 square feet, Jones Lang LaSalle's Amy Bowser tells GlobeSt.com—namely one floor in 2013 and four other floors in 2014. The tenants are the American Hospital Association, the National Retail Federation and the government affairs division of a drug maker. "We happen to know these tenants are relocating," Bowser says.

Their departure will be an opportunity for the owner, Paramount Group, to reintroduce the building, which is located at 325 7th St., NW, to the market with the new enhancements it has put in place." Paramount acquired the 174,200-square-foot, 12-story property in 2011 knowing that some 100,000 square feet of space would roll over within four years.

Their departure will also be, as stated, an opportunity to see whether the unfolding trends in the trophy market will continue—that is, a flight to quality, strong rental rates and a tendency for tenants to snap up large blocks of this high-quality space.

JLL chronicled all of the above in its latest report on the DC trophy market, released last week. The flight to quality can be seen in the strong pre-leased rate for trophy buildings under construction, Bowser says--there is about 617,000 square feet of trophy space under construction, 80% of which is preleased. For existing inventory the asking rates are in the upper 40s per square foot triple net, while new product is calling for mid 50s per square foot.

Also, of the existing trophy buildings, only five offer unencumbered blocks of space of more than 50,000 square feet. "We are starting to see a diminishing supply of large unencumbered blocks of space and a continued healthy appetite from the investment side," Bowser says.