Transit, office use still haven't recovered in Montgomery County, mobility data show

Use of parks continues to surge

New mobility data released by Google indicates Montgomery County residents still aren't riding transit or going to the office in pre-pandemic numbers, despite having one of the highest vaccination rates in the country. Google compared data acquired from devices between September 29 and November 10, 2021 with pre-covid-outbreak data collected between January 3 and February 6, 2020. 

Transit use is still down 43% from early 2020 ridership numbers, the new data show. Employees are traveling to office workplaces 31% less this fall than in early 2020. 

Montgomery residents are still spending
more time in pharmacies than before the
pandemic, but less than they did this summer

County residents are still shopping in grocery stores and pharmacies more than they did before the pandemic, but only 2% more often, down from 7% more at the time of my last report. Shoppers are still not going into other types of retail stores or recreation facilities as often as they did pre-covid; those numbers are still 11% below the early 2020 baseline.

Use of Montgomery County parks during the
pandemic continues to surge

Montgomery County still has a new appreciation for the great outdoors, though. Fall use of parks countywide shot up to 42% higher than that of early 2020; that number was up only 28% more in warmer July and August 2021, by comparison. 

More Rockville office space to become residential

The moribund Montgomery County economy, and the failure of County officials to attract even a single major corporate headquarters to the county in over 25 years, continues to severely impact the real estate market. With little demand for office space, the county has watched revenue plummet as higher taxes must replace the lost commercial revenue, and those taxes impel the wealthy to flee to lower-tax jurisdictions. Now more planned office space in Fallsgrove is expected to become residential, when the Rockville planning commission approves an amendment allowing that on March 10, 2021.

This is far from the first time land in Rockville that was meant to provide jobs and eliminate commutes for a number of residents has been lost to residential housing. The latest flip will allow 210981 square feet of potential office space to instead be used for up to 350 units of multifamily housing. This will not only eliminate planned office space, but also exceed the caps on building height and total multifamily units allowed in the Fallsgrove master plan.

The proposed residential building would be 76' tall. Parking would be above-ground underneath the residential floors, and on surface lots around the building. A 19000 SF pocket park, a small playground, and a shared-use path along Research Boulevard would be constructed as part of the new development.

Developer Lerner Enterprises' "statement of justification" for the request states that "unsuccessful efforts to market the Property for office use for more than a decade due to the lack of market interest, coupled with the challenges the Applicant has had in leasing their two office buildings in Fallsgrove proper, are the driving forces behind the subject Project Plan Amendment.” It also notes that existing office buildings at 14955 and 14995 Shady Grove Road currently have a high number of vacant units.

Rockville planning staff has made including 2000 SF or less of retail space a condition of approval for the amendment. Lerner says there is no market for retail at that location, and that including it will compromise the successful design of the planned residential building. The company also notes that the retail market in Rockville is weak, citing Rockville Town Square as an example. 

Staff is recommending approval of the project plan amendment, with 13 conditions. If passed, the approval will be transmitted to the Mayor and Council for their approval.

Lerner's statement calls the possibility of Montgomery County's office market rebounding "a remote event." The developer hired Avison Young to study MoCo's office market in general. "The Avison Young reports confirmed that the office market overall in Montgomery County is not strong," Lerner wrote.

BurgerFi, The Offices at Pike & Rose post coming soon signage

More signs of the future are popping up at Pike & Rose. BurgerFi, the gourmet burger chain that uses 100% Angus beef, has posted coming soon signage on its construction wall along Grand Park Avenue. Developer Federal Realty is also beginning to market leasing space at 909 Rose, branded as The Offices at Pike & Rose. Also coming in Phase 3 are 900, 910 and 915 Meeting Street.

51 Monroe St. part of Brookfield securitization move

Brookfield Property Partners has been criticized for carrying too much debt by some investment experts. The company also has office properties in moribund office markets like Montgomery County, also considered risky. Now BPP is placing several D.C. area properties into a $223.4 million securitization scheme through Morgan Stanley.

51 Monroe St., the tallest building in Rockville, is one of the office properties. Also in the securitization deal are One Central Plaza and 6110 Executive Boulevard, both located in Bethesda.

Whether the move will ease critics fears of risk is unclear, however. Some argue that such deals themselves magnify risk, and obscure the equity the owner holds in the properties in question. Such securities were one of several factors that led to the "Great Recession" a decade ago.

77 Upper Rock retains Transwestern to handle leasing, property management

DSC Partners has retained real estate giant Transwestern to handle leasing and property management of their 77 Upper Rock office building. The 232282 SF building, constructed in 2005, is currently vacant but available for immediate occupancy. New owner DSC, led by former First Potomac execs Doug Donatelli and Nick Smith, plans to revitalize the building by adding contemporary fitness facilities, conference rooms, tenant common areas, green space and other tenant amenities.

In addition to the upgrades, DSC is also wagering that the transformation underway in the Upper Rock area will make the LEED Silver certified office building more appealing to prospective tenants. Coming soon within a block of 77 Upper Rock will be MOM's Organic Market, and Cava Grill, among other retail and dining options. It's a commendable move in a time when many other developers are converting existing or planned office space in Rockville to residential, forcing more Rockville residents to drive into D.C. and Northern Virginia to employment.

Washington Property Co. acquires 2nd I-270 corridor office building, as CubeSmart opens (Photos)

Washington Property Company announced yesterday that it has acquired a second office building in the same I-270 corridor office park where it has just converted another one into a self-storage facility. That facility, under the CubeSmart brand, has just opened at 4 Research Place in Rockville.

WPC is more bullish on office space with the second building, 1 Research Court, which it and partner Alex. Brown Realty, Inc. plan to continue to operate as an office property. The partners acquired it for about $17 million. Built in 2001, the office building is 89% occupied by 14 tenants. WPC plans to upgrade the building's lobby, elevators, bathrooms and fitness center, to maintain its competitive edge in the market.

“We believe that our planned value-add improvements, along with a dearth of new supply, will increase this property’s appeal to small- and medium-sized businesses, including those in the life sciences," WPC principal Andrew Eshelman said in a statement yesterday. Life sciences and biotech are two bright spots in the moribund Montgomery County private sector economy, and the 270 corridor is the place to be for those industries.

CubeSmart is one of the top four self-storage brands in America, and space can be rented now either online, or by visiting the site in-person. If you've driven past on 270 recently, you've probably noticed the new building facade that faces the highway. The building has 715 climate-controlled storage units, and indoor, air-conditioned corridors to reach them.

Photos courtesy Washington Property Company

3 new buildings proposed in office park across from King Farm in Rockville (Photos)

First Potomac Realty Trust has made a pre-application submittal with the City of Rockville proposing to add two new office buildings, and a café pavilion with open space for employees, at the Redland Corporate Center. The office park is located directly across Gaither Road from King Farm, at 520-540 Gaither Road.

This neighborhood is directly
across from the office park
entrance

After adding these structures over a 3-phase construction schedule, the property will hold 800,000 SF of office space, and a maximum of 3,000 SF of restaurant space (including the existing buildings already on the site). The two 11-story buildings will be built atop 267 surface parking spaces that are there today, and replace those with 1342 structured parking spaces.

Site plan
(click to enlarge)

FPRT says the additions will help the office park be more competitive in the weak Montgomery County office market, by adding the types of building designs, features and amenities employers want today.

The calendar for the full build-out is not known, as the application notes the construction will be based on market conditions. A Development Review Committee meeting on the project is currently scheduled for December 3.

51 MONROE STREET REBRANDED IN ROCKVILLE (PHOTOS)

The tallest building in Rockville (for now) is still called 51 Monroe Street. But it's looking a bit different these days. Recently renovated by owner Washington Real Estate Investment Trust (WRIT), the 1978 office tower complex has a new logo. Look closely at the top of the building, and you can see where the iconic "51" numerals were pried off, and replaced with the new design. WRIT also renovated the main lobby. Sorry, but I'm a fan of the old, larger 70s font numerals.

See the remnants of the
old logo? I preferred it
to the new design, which
is a step down, in
my opinion

Still one of the top
office buildings in
Montgomery County

The renovated lobby

WEAK OFFICE MARKET IN MONTGOMERY COUNTY CAUSING LOWER EXPECTATIONS

What was once denied, is now the newest buzzphrase in Montgomery County: the county office market is weak. With no large employer moving to the county in over a decade, the government - and struggling office building owners - are scrambling to temper once-high hopes.

The gleaming building at 7550 Wisconsin Avenue, that was completely renovated into a Class A office tower by developer Akridge, was poised to become a hot business address. 18 months later? It's a vacant monument to a business climate that fails to appeal to major firms searching America for a new corporate headquarters.

With no significant policy or taxation changes on the horizon, no plans to build a new Potomac River crossing for the Dulles Airport access international firms demand, and landlords having to still pay their bills while vacant, some are now thinking small.

Montgomery County's Economic Development Fund is now offering a program designed to attract smaller firms to vacant office space in the county. The MOVE program will offer $4-per-square-foot rent subsidies to a first-time renting firm that meets 4 criteria. Spaces that qualify are limited to those between 2,000 and 10,000 square feet.

Akridge is ahead of the downward curve in Bethesda.

The company is currently in the process of dividing the fourth floor of 7550 Wisconsin into 3 suites - on spec, as there are still no tenants. But going forward, those new suites would likely qualify for the new MOVE subsidy. There are still many other floors in the building, however. According to a source, Akridge is open to dividing other floors into suites, if the initiative proves successful on the fourth floor.

LOCAL DEVELOPER SPEAKS FRANKLY ON MOCO'S WEAK OFFICE MARKET, CRUSHING ENERGY TAX

Some refreshingly-candid commentary on Montgomery County's massive energy taxes, and weak market for office space, was delivered Tuesday by Charles Nulsen, president of Bethesda's Washington Property Company. Nulsen was testifying before the Montgomery County Council, on a slew of new energy and environmental requirements that would impact residents and businesses countywide.

But some of his more general testimony on the current economic development climate in the county jumped out. I recall being in the audience at a council hearing three years ago, and hearing the testimony of the county chamber of commerce regarding job creation. When the statistic of the low number of jobs created in MoCo was contrasted with Fairfax County's number - many times that of Montgomery's during the same period - there was an audible gasp in the room. Listening to Nulsen's testimony, those who might have tuned out local economic matters could quickly understand why we are behind.

Nulsen testified that Montgomery County businesses' utility bills are 30% higher than those in DC or Northern Virginia. He said the county currently "collects more for the distribution of electricity than Pepco itself." In addition to our tremendous traffic congestion (due to the failure to complete our master plan highways), lack of access to Dulles Airport, and high tax burden, these disparities hardly make MoCo the easy choice for large employers seeking to relocate.

That impact is felt in the county's weak office market. The vacant office space in Bethesda, Rockville, Silver Spring and Wheaton speaks for itself. With no large employer moving to the county in a decade, developers are abandoning planned office space countywide. We were told that "smart growth" would allow people to "live where they work." The factual evidence suggests otherwise: Office space planned for "smart growth" communities such as Clarksburg and King Farm is being abandoned, or converted to residential. An office building in downtown Wheaton was recently flipped to residential, as well. Ultimately, the "smart growth" has actually led to more traffic congestion and sprawl, as we are ending up with more residential than was even planned. And all of those additional residents are going to commute in to the usual downtown DC and VA employment centers.

Nulsen said his own office properties have a 25% vacancy rate, and that "our commercial tenant base is dwindling." He added that he has had difficulty attracting office tenants for a decade. I would point out that that coincides directly with the lack of major firms relocating to the county over the same time period. With a dwindling tax base, and surging population, the county's current economic trajectory is "unsustainable," Nulsen argued.

"We have an A- grade in environmental stewardship. We have an F in economic stewardship," was Nulsen's assessment of where Montgomery County stands at present.