Makeover Mania
So, you want to redevelop that old office building downtown. What do you do with the folks already leasing there? According to panelists at our Repositioning Summit last week, it's complicated.
Minshall Stewart's John Stewart has overseen high-profile repositions at 2175 K and 2001 L (and soon, 1401 New York), and says owners need to be creative with tenants in a repositioned building. (Give everyone a turn at the jackhammer?) Sometimes it means moving a tenant around a building, and other times buying a tenant out of a lease, John says. But it's also important to sell tenants on the benefit of a repositioned property.
MRP's Bob Murphy and WRIT's Tom Regnell are involved with some big repositions right now—MRP's re-do of the Bethesda Air Rights complex (now renamed "Bethesda Crossing") and WRIT's facelift of 7900 Westpark Dr in Tysons. Tom says differentiating the renovations from the rest of the market is a key way to win occupancy, since today's tenant base is more sophisticated than ever. Bob says it's important to poll existing tenants on what they need, a strategy that led to putting a 3,000 SF gym in Bethesda Crossing.
EagleBank CEO Ron Paul (here with Bisnow's Arlene Begelman) has financed many repositionings, and says having clear objectives—as well as financial flexibility—before putting the building under the knife can go a long way. (Ron's also a substantial real estate developer and owner himself.)
While most people only see the exterior of a renovation, replacing building systems is a huge part. KTA Group's Randy Thompson says new systems have to be highly energy efficient, not only to save costs for the owner but also because buildings are massive energy users. Like Ron, Randy says owners/developers need clear goals in mind before repositioning.
DAVIS Construction's Paul Athanas (with Goulston & Storrs' Allison Prince) says a repositioned building can hit the market much faster than new product—14 to 16 months versus 20 to 24 months. The shorter construction length means less contingency risk for the owner, too, Paul says. (More importantly, it means your marketing material can make claims like "be in your new office before House of Cards returns.") Stay tuned for more event coverage tomorrow, including more on Chip Akridge's remarkable vision for reinvigorating the National Mall.
