Wednesday, August 10, 2011

Take a Chance on Me: Skanska Mulls Speculative Offices for NoMa

For a world of runaway debt, careening stock markets, sinking credit ratings and overall financial gloom, the Washington D.C. commercial real estate market is a surprisingly bullish place. One such believer is Skanska, fresh off success with a speculative office project in Penn Quarter, and mulling an encore for its NoMa project that it purchased last January.

With a potential for 680,000 s.f. of development, the site would be Skanska's largest DC area project to date, by far. But the developer is in a building mood, having now leased out 90% of its speculative downtown office project at 10th & G before the doors even open, and with "sincerely strong" interest in its Wilson Boulevard office project. With that tailwind, Skanska is putting the final touches on a design for a two-phase office project that could be moving dirt by next summer. With Davis Carter Scott at work designing 300,000 s.f. of office space for phase 1, the developer "is going full bore on all pre-development activity at this time," says Skanska Executive Vice President Rob Ward.

Not that Skanska would be the first polyanna to build without an anchor tenant already signed on, some of the largest office projects to date have kicked off without a financial savior, such as Monday Properties' 35 story office tower in Rosslyn and the CityCenter DC, both of which are well into construction without a single name to hang in the lobby.

And not that Skanska isn't working on a lead tenant; project supervisors have interviewed commercial brokers and expect to announce a leasing team next week. Still, Ward says the building is "100% funded" from internal capital, and the company can make the decision to build - or not - based on market conditions next spring when planning has run its course. "Its automatically a go if we get tenants, but we'll make that call by the middle of next year."

On the books so far is a large office project for phase 1, which Ward says will be a LEED Platinum design within the existing zoning envelope. Ward notes that while current zoning allows for 680,000 s.f. of development, "we'll be very careful how we build out to maximize light rather than the building footprint." While the retail component is not large - somewhere around 15,000 s.f. - Ward foresees a neighborhood enhancer rather than just a building-serving retail space; "a nice location for a good restaurant and bar."

Skanska's record bodes well for a spec project, and the NoMa numbers are still sound, with the vacancy rate just 9% within the NoMa BID according to Delta Associates.

At 10th & G Streets, Skanska is celebrating a 90% lease up of the office building - its first in the United States - that will complete next month after starting off sans tenant. Only about 16,000 of the 165,000 s.f. office building remain unclaimed, and the 4,000 s.f. ground floor retail space has been leased to Comma, which will serve 3 squares a day. 3 major tenants account for most of the leasing activity that is expected to earn LEED Gold certification.

Skanska bought the NoMa property at First and M Streets, NE, last January for $41 million from an affiliate of the Polinger Company. The site was designated as phases II and III of Capital Plaza, though Skanska will rename the project. Skanska is a Swedish-born company with offices in the United States, including Washington D.C.

Washington D.C. real estate development news


Anonymous said...

Just so you know, that picture your showing for this skanska property at 1st and M is currently under construction as an Archstone building. May want to verify that this is the property... unless skanska sold it to them.

Anonymous said...

Oops ignore that comment, I was looking at the wrong corner of the block. fail.

Anonymous said...

There's another developer who owns an old arena east of the tracks and huge parking lot north of N.Y. Ave that I wish was as risk-taking as this. But sigh, it's easier to wait for city incentives while letting your property rot.

J.T. on Aug 11, 2011, 3:09:00 PM said...

Is this the small parking lot on the SE Corner, or is this the area to the east of the Harris Teeter Parking lot...between that building and the metro?

The parking lot on SE corner is kind of small.,+20002&hl=en&ll=38.905445,-77.005918&spn=0.001684,0.002411&sll=37.0625,-95.677068&sspn=55.455479,79.013672&t=h&z=19

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