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Planning Department Releases Office Market Assessment Report

by Bridget Schwiesow on June 22nd, 2015

office market graphic
Study recommendations include revitalizing office parks as amenity-rich, mixed-use development and converting vacant buildings to new uses

SILVER SPRING, MD – The Montgomery County Planning Department, part of The Maryland-National Capital Park and Planning Commission, has completed an in-depth assessment of regional office market conditions and the implications for Montgomery County. Staff will present this study to the Planning Board at its public meeting on Thursday, June 25.

Prepared by Washington, DC-based Partners for Economic Solutions (PES), the 106-page study examines an array of economic forces changing the Washington, DC region’s office market and best practices for next-generation office development.

View the Office Market Assessment Report.

The research highlights unprecedented challenges confronting the regional office market, including high and rising vacancies, declining rents, slow absorption and minimal new construction. These trends are evident nationwide as signs of a still recovering economy, but the region also has been hard hit by federal government’s cuts in spending and leasing.

Regional Overview of Office Vacancies:

-Currently, 71.5 million square feet of office space is vacant throughout the Washington, DC region.

-With 20 million square feet of vacant office space, Fairfax County accounts for the largest share (28 percent) of vacancies region-wide.

-The District of Columbia has the second highest share (22 percent), with 15.6 million square feet.

-Montgomery County has nearly 11 million square feet of vacant office space, accounting for 15 percent of regional vacancies.

-Arlington County and Prince George’s County have 9 million and 5 million square feet of vacant office, respectively.

Key Findings:

-In Montgomery County, 12 office buildings totaling 2.1 million square feet of space are completely vacant. Eight more buildings totaling 1.2 million square feet will become vacant this year.

-Seven office buildings totaling 400,000 square feet are now under construction in the County. Region-wide, 33 office buildings totaling 7.3 million square feet are under construction.

-Most jobs created during the economic recovery have been in retailing, restaurants, and medical facilities instead of in office-based sectors such as professional and technical services.

-Telecommuting, technological advances, more efficient work spaces and practices such as hoteling have enabled office tenants to reduce their square footage even as they expand their workforce.

-The data show that Montgomery County office centers located in mixed-use developments with a strong sense of place, a quality environment and good transit connectivity are best positioned to compete. This trend is consistent with recommended land use strategies in recent County plans for White Flint, Bethesda, White Oak and other communities.

-Single-use office developments without convenient transit or highway access are having difficulty in attracting tenants.

-Future office development is likely to occur at a slower pace and concentrate in prime locations. Not every location will be able to attract new office development or maintain former occupancy levels.

Study Recommendations:

-Create or retrofit office environments that are attractive to today’s tenants by adding amenities, mixed-uses and improved transit or highway connections. Incentives to renovate existing offices could be effective for buildings near transit or in mixed-use areas.

-Reduce the supply of non-competitive office space by converting vacant office buildings to housing, hotels or other uses. Policies that facilitate site assembly could help owners of older, small office buildings to redevelop.

-Plans for approved but unbuilt suburban office parks may need to be revisited. Some projects already have converted planned office space to residential or other uses, but redirecting development capacity to more competitive locations should be considered. Zoning impediments to redevelopment and diversification should be removed.

-Increase demand by competing for office tenants more effectively. County economic development initiatives, including business attraction and retention, workforce development, technical assistance and support for local entrepreneurs should be intensified.

Application of Market Research:

These findings and recommendations will guide upcoming Master Plans, especially the newly launched plan for the 247-acre Rock Spring Park area east of Montgomery Mall. Currently, Rock Spring is a single-use office center that is home to headquarters for Lockheed Martin and Marriott. A new street network, public amenities, residential uses and environmental upgrades will be examined for the area.

View the Montgomery Planning Department Office Market Assessment Report web page.

From → Board, Planning

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