Chevy Chase-based JBG Cos. sold two Rockville office buildings fully leased by the Food and Drug Administration for $48.6 million, according to broker HFF, who represented the seller.
NGP V Fund LLC bought the two properties, which combined for a total 148,742 square feet within walking distance of the Twinbrook Metro Station.
The FDA’s Office of Regulatory Affairs occupies 12420 Parklawn Drive under a lease that runs through December 2020. The 93,014-square-foot, four-story property dates to 1972. It underwent a comprehensive $17.5 million renovation in 2009 for FDA’s occupancy and has achieved gold certification by the U.S. Green Building Council.
FDA also has a lease that recently was renewed through February 2023 at 5630 Fishers Lane. The 55,728-square-foot, two-story building originally was completed in 1967, but it underwent a “gut” renovation in 1997.
The two properties sit within a cluster of more than 2.3 million square feet across nine buildings, leased by the General Services Administration. That includes the Parklawn Building, where JBG recently renewed 935,000 square feet under a lease with the federal Department of Health and Human Services than runs through September 2030.
McLean, Va.-based NGP, formerly called National Government Properties, specializes in government-leased buildings. Its funds have acquired, developed and managed assets totaling 12.5 million square feet and valued at more than $2.5 billion.
NGP ranked sixth last year on the list of the nation’s largest investors in properties leased by the GSA, according to broker Colliers International.
JBG ranked second and remains the most active federal landlord in the Washington/Baltimore region. Among the largest of its recent projects, the firm this month delivered a 538,000-square-foot, two-building complex in Northwest Baltimore, replacing an aging downtown facility. The $150 million property is the new workplace for 1,600 Social Security Administration workers for the next 20 years under the current lease.
Weak private sector job growth and continued federal consolidation means landlords in the Maryland suburbs of Washington, D.C., will be stuck with more vacant space this year, according to a report by broker Cushman & Wakefield.
“Moderate job growth in the region will not be sufficient to absorb the vacant space currently on the market in addition to the space expected to be vacated by the [General Services Administration] in the next 12 months,” the report concluded.
Leasing levels jumped by 74 percent over last year, with just under 2 million square feet of space leased, Cushman said. But that remains far below the 10-year average of 2.9 million square feet.
At the same time, even while the D.C. metropolitan area added 20,000 private sector jobs last year, the unemployment rate rose to 5.3 percent in Montgomery County, up from 5 percent. The jobless rate in Prince George’s County climbed almost a full percentage point to 7.6 percent, boosted at year end, when Computer Sciences Corporation said it would vacate its New Carrollton office, which has 450 employees.
The value of suburban Maryland property sales jumped by about 73 percent to $658.5 million last year. The average price per square foot was $192 compared to $160 in 2012. The increase in deals was due in large part to the sale of the Air Rights Center in downtown Bethesda. A joint venture between MRP Realty and Rockpoint Group paid $205 million for the three-building, 688,000-square-foot complex.
Montgomery County showed positive 395,000 square feet of absorption of office space, thanks to two major private firms that moved into new build-to-suit headquarters. Choice Hotels took delivery of 138,000 square feet in Rockville and Digital Receiver Technology, a Boeing subsidiary, absorbed 134,000 square feet in Germantown.
“Unfortunately, this trend of growing occupancy levels is expected to be reversed in 2014 as large blocks of space due to consolidations and downsizing among GSA agencies will be vacated,” Cushman said.
Tenants will vacate almost 800,000 square feet in the Rock Spring Park and Pike corridor submarkets this year.