C&W Regional Head Says Q2 Was ‘Very Difficult’ But Sees Bounce Back Coming

The D.C.-area leasing and investment sales markets have been slow in the second quarter as the pandemic has made it harder to close deals, but the regional head of one of the major brokerage firms said she foresees a strong recovery in the coming months. 

Cushman & Wakefield Regional Managing Principal Roberta Liss, who oversees the Northeast, North Central and Mid-Atlantic regions, said leasing and sales activity began to slow significantly in April. 

"The second quarter was very, very difficult," Liss said Tuesday on a Bisnow webinar. "But I'll tell you, we have a really strong pipeline, and the forecast of recovery feels a lot better than we actually thought it would be at this point. ... Q3 looks like a pretty strong bounce back."

Liss pointed to a recent $85M D.C. office sale Cushman & Wakefield closed to illustrate the positive signs in the market. The firm in early March began marketing two Georgetown-area buildings, leased by Georgetown University and the British International School of Washington. Last week, it closed on the sale of the buildings to Grosvenor Americas. 

"Those types of assets with strong financial base tenants, they have shown their strength," Liss said. 

JBG Smith Executive Vice President Dave Ritchey, who oversees office leasing for the REIT, said the pandemic has made filling space more challenging, but he is still seeing activity. 

"It's still business as usual to the best that we can make it relative to office leasing," Ritchey said on Tuesday's webinar. "Certainly things have changed quite a bit in terms of how we can conduct that business. There is a much higher emphasis on the use of technology, and virtual tours have become the norm now."

The D.C. office market has historically been resilient through downturns because of the stability of the federal government and the sectors that benefit from its spending, and Ritchey said he expects that trend to continue in this recession. He said JBG Smith's portfolio has a high concentration of GSA agencies, government contractors and lobbying firms, plus Amazon HQ2. 

"Our tenant composition and industry mix feels like its very well-positioned," Ritchey said. "We're cautiously optimistic. There will be headwinds coming out of this — we're astute and sober in that regard — but we do see some signs of optimism as well."

As jurisdictions begin their phased reopenings, JBG Smith and Cushman & Wakefield have both released plans for tenants to return to the office. 

The guiding principles of Cushman & Wakefield's report, Liss said, are controlling building access, creating social distance plans for common areas, reducing touch points and increasing cleaning. Additionally, she said communication will be key. 

"There is going to be constant communication on what happens with the common areas and workout facilities and food facilities and all the areas that employees access," Liss said. "We need to be partners with each other and our communities in order to maintain our safety."

Liss, who manages more than 1,200 employees at Cushman & Wakefield, said the firm has begun to bring people back to the office at 25% capacity. In the D.C. region, it has two groups with staggered schedules that are alternating weeks in the office, she said. 

To keep occupants of its buildings safe, Ritchey said JBG Smith has implemented an online symptom screening process, in which employees answer a handful of questions on their health each morning. 

Two of the main challenges around bringing people back to the office, Ritchey said, are child care and public transportation. With schools and summer camps closed, many employees who have children need to find child care options before they can come back to the office. And employees who take transit to work may not feel comfortable riding on trains or buses, he said. 

"That is a real challenge in terms of any type of reasonable process of getting people back to work if we don't have a solution around that," Ritchey said of child care. "Our transit agencies demonstrating that they're taking all the necessary steps to keep our public transportation clean and safe is equally important."