Lean Supply of Space Drives Development and Quick Lease Deals in the Suburbs as Well

ROCKVILLE, MD-The Tower Oaks office park may plug in a California electric company soon. Pacific Gas & Electric’s National Energy Group is rumored to be in negotiations with The Tower Cos. to build a campus headquarters at the Tower Oaks office park near Interstate 270 here real estate officials say.

If a deal is concluded, the utility would build two buildings totaling about 480,000 sf on a site that is zoned for a million sf of development.

The Tower Oaks park has seen a lot of activity lately. Tower Cos. is building a 10-story, 275,000-sf speculative office building in the park near Interstate 270 and Montrose Road interchange, but the PG&E unit, based in nearby Bethesda, apparently is talking about building two other buildings.

Tower Cos. isn’t the only property owner in the 192-acre park. Boston Properties, which bought property there from Tower Cos., is nearing completion on its own building, The Preserve, at 2600 Tower Oaks Blvd. The seven-story building is nearly fully leased by OTG and American Express. The top two floors remain uncommitted, but Clarity Communications is rumored to be negotiating for the space. A broker for Boston Properties declined to confirm this.

The market is doing well enough that Boston Properties has decided to go ahead with another speculative seven-story, 178,000-sf building at One Preserve Parkway.

Vacancies are tight in the suburban Maryland sub-markets from Bethesda stretching north through Rockville and Gaithersburg. Ranging from 2% to 4% on average, which has kept buildings full and propped up rents. In and around Tower Oaks, rents average $31 to $34 per sf.

“It’s an ideal location for corporate users,” with more hotels and other amenities expected to be added to the area, says Larry Thau, who oversees Insignia/ESG’s Bethesda office.