Purple Line Construction Already Sparking Suburban Maryland Office Renaissance

April 9, 2018
By The 2030 Group

By: Jon Banister

When co-working giant WeWork was deciding on the location for its first college campus space, a 16-mile light-rail project under construction in the Maryland suburbs proved to be a deciding factor.

“The first conversation we had with them was that they wanted closer proximity to Metro, so, frankly, explaining to them the Purple Line is coming and the stop is a block from the WeWork site, having that connectivity one stop from the College Park Metro station was very helpful in sealing the deal with WeWork,” said Ken Ulman, the University of Maryland’s chief economic development strategy officer.

Since the Purple Line broke ground in late August, signs have begun to point to a surging office market in the suburban Maryland corridor from New Carrollton to Bethesda, with soaring construction and leasing activity reminiscent of the impact the Silver Line has had along the Dulles Toll Road in Virginia.

Suburban Maryland currently has 2.6M SF of office space under construction, according to CBRE’s Q1 office market report, the most since 2001. The market recorded 181K SF of positive absorption in the first quarter, bringing its vacancy rate down to 15.2%, its lowest level in over five years.

“Adding in another Metro line similar to what you see along the Silver Line will be very beneficial for the suburban Maryland office market,” CBRE Senior Research Analyst Tim Whitebread said.

Developers and landlords are already feeling the effects of this surging activity. Corporate Office Properties Trust is developing a 75K SF spec office building in College Park, the city’s first spec office project in at least two decades. The project is roughly 80% pre-leased ahead of its December delivery.

It is part of College Park’s Discovery District, a $2B public-private investment, of which COPT plans to commit roughly $500M on a 60-acre site that could support 1.5M SF of development.  T

enant interest in College Park has increased significantly since the Purple Line broke ground, said Evan Weisman, who until last month led COPT’s efforts in College Park. He now works for Donohoe Cos., another firm with a large office asset in the Discovery District.

“Two years ago, College Park just wasn’t considered at all really; it wasn’t thought of as an office submarket,” Weisman said. “Now, people are realizing that rather than locate downtown or in Arlington, if they’re forcing employees to drive around the Beltway, with the Purple Line, all of a sudden College Park becomes a viable location.”

Donohoe owns a three-story, 160K SF office building on a 7-acre site in College Park. The property is roughly 60% leased, Weisman said, and the site could support additional development.

“We view that asset very differently than we did before the Purple Line and the development in College Park started,” Weisman said. “Before anything was announced, this property was a typical office building on a surface-parked parcel of land, and now all of a sudden, all along the Purple Line, this site included, there’s more potential for better utilization of land.”

Major mixed-use developments on the eastern and western ends of the Purple Line have also experienced strong activity in recent months.

Urban Atlantic broke ground in October on its planned 2.7M SF development at New Carrollton, the easternmost Purple Line stop. Kaiser Permanente signed on for 170K SF last year, kick-starting construction on the 200K SF office building, the first phase of the 71-acre project. The development is ultimately slated for 1.1M SF of office.

The corridor did experience a major loss in January when Discovery Communications decided to leave Silver Spring and move its HQ to New York City. That 500K SF building sits near a future Purple Line station, an asset officials are sure to bring up as they continue to market it to other companies.

In Bethesda, Carr Properties in October signed its first tenant at the 937K SF mixed-use development it is building atop the Purple Line’s western terminus. WTTG Fox 5 pre-leased 57,500 SF at the Apex Building project, with plans to move from its current Tenleytown space in 2021.

Carr CEO Oliver Carr said the project has seen strong activity recently and the developer is in negotiations with other potential tenants. He said the Purple Line is one of several factors these companies are talking about when looking at moving to the development.

“Companies are thinking about being able to draw employees from multiple locations, and the fact that Silver Spring is now one stop away from Bethesda on the Purple Line opens up a whole new employee base in terms of the ease of getting to work,” Carr said. “Being able to locate at the intersection of two communing lines versus one, two is better.”

Near Carr’s project, JBG Smith has recently landed multiple tenants at its own trophy office development, bringing the 287K SF project to over 70% leased. Marriott International last year chose to move its corporate HQ to Downtown Bethesda.

“Bethesda is on fire right now and is going through a renaissance in terms of the amount of high-quality space hitting the market,” Cushman & Wakefield Senior Director of Research Nathan Edwards said. “The rents they’re achieving in those projects is causing overall rents to push up as well.”

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