CORFAC Attendees Get Real About DC

WASHINGTON, DC-Attendees and participants at CORFAC International's Fall Summit, held this week in Washington DC's The Fairfax at Embassy Row were generally upbeat and even, in some cases, downright giddy about commercial real estate's prospects.

Industrial? It is being bolstered by such trends as e-commerce and in some parts of the country is seeing a significant level of spec development. Office? Ask Bill Hawkins, principal of Chas. Hawkins Co./CORFAC International and CORFAC 2013 president, about opportunities in his home market of Nashville. They have never been more plentiful or more interesting, he says. In fact, ask him about CRE opportunities in general: "There has never been a better time to be involved in commercial real estate than now," he will tell you.

A number of brokers attended the CORFAC gathering but their enthusiasm for local trends was far more muted. GlobeSt.com spoke with a handful of local brokers from Donohoe Real Estate Services/CORFAC International--Brian K. Coakley, Bryan S. Gray, Thomas J. Long and Don Konz--in between sessions at the event in an informal roundtable discussion.

The overriding theme: it is still very tough out there, thanks to sequestration and Congressional penny pinching.

This is not exactly news, but the way these brokers described the market was telling about the depth of the difficulties. For example:

"Sequestration has definitely affected the psyche of government contractors. They are still very nervous about what might happen."

"Tenants are not willing to make long-term decisions but instead will only commit to month to month leases."

"I have one client that for years never had a vacancy but now has moved to chronic vacancy because its FAA government contractor is only renewing on a month to month basis."

"We are seeing absolutely no tours in our Southwest properties, and that is very rare. The phone is just not ringing."

"What activity we do see are tenants shuffling from one building to another in search of the very lowest rent. They are not looking to expand."

"Landlords will do anything to keep their tenants, they will make any deal to keep a tenant from leaving."

And perhaps the most discouraging comments of all:

"There is just no velocity in the market."

and

"There are fewer young people coming into the business now."

Some of the comments, it would seem, verged a bit into the area of hyperbole. The presentations made about the DC market during the conference did highlight the area's strength—a strength that is admittedly vibrating at a lower frequency than usual, but still can be considered a viable market.

For example, Gray, during his presentation noted that while vacancy in Northern Virginia was higher than usual, properties closer to the city continue to perform well with asking rates hovering around the mid 40s per square foot for class A deals. The further away from the core, though, the more likely it is the landlord will have to drop its rate.

In his presentation, Long also noted the flat office activity in the suburban Maryland market, but he also took care to highlight a few notable investment sales and leases that have occurred in recent months.

So do these two visions of DC mesh in any way? Can the doom and gloom hallway conversation talk co-exist with the measured but realistic view of a still-viable but struggling DC market as portrayed during the presentation. No problem, the brokers say. Times are hard but the market is big enough and it is still home to the federal government, no matter how much it pulls back its spending. "It is tough out there and I have to work harder to get the same size deals done but DC will always be a gateway city where tenants want to be and investors want to put their money," one said.