main image: Stonebridge
As previously reported, first quarter 2020 data revealed Bethesda was the hottest office market in the entire Washington D.C. area, having the largest amount under construction. It also had one of the highest pre-lease rates in the area. According to building owners — despite the effects of the COVID-19 pandemic lockdowns across the region — office leasing tenants have been some of the strongest and most reliable payers of rent. For example, landlords have been able to collect office rents at higher percentage than retail.
Rockville-based Federal Realty Investment Trust (NYSE:FRT) President and CEO Donald Wood made this point during a first quarter conference call, “While we absolutely did not collect a lot of the lifestyle rent on the retail side, overall, we collected two-thirds of the rent due in those properties, because of the residential, because of the office component to [them].” Wood was referring to the company’s top three largest developments that includes Pike and Rose in North Bethesda. The developer will be relocating their headquarters to a new office there called 909 Rose.
Developers are finally focusing their attention on downtown Bethesda after years of stagnation. Bethesda is playing catch-up but the pent-up demand has propelled the market to new highs in construction. The industry has been set aside as essential business by state governments during the shutdown.
The latest data from the month of April 2020 shows Bethesda had 1,530,307 square feet of office space under construction. Reston, Va came in second with 1,455,987 square feet and the Washington, D.C. central business district totaled 890,054. The data is according to Transwestern.
Also worth noting is that Bethesda/Chevy Chase had the lowest direct vacancy rate of the three submarkets at 9.3 percent. Washington’s CBD and Reston held at 9.9 and 13.2 percent respectively.
When all is said and done Bethesda/Chevy Chase will become the largest submarket in Montgomery County surpassing North Rockville but there’s a long way to go before the County as a whole reaches its rivals. With only approximately 64.4 million square feet of office in the County its a long ways off from Fairfax County which totals approximately 117.2 million square feet of office space. In a time where the unemployment rate is at historic highs, County governments all-over have little choice but to make significant job growth a top priority.