A glimmer in the otherwise bleak commercial real estate market.
The real estate investment firm Hines bought a three-year-old, 11-story office tower in the hub of downtown Washington, D.C., from The Lenkin Co. for $60 million, the Washington Business Journal reported, citing information from the D.C. Recorder of Deeds.
In addition, the D.C. office of the powerhouse law firm Davis Polk signed a 17-year lease with the building at 1050 17th St. NW for 84,000 square feet of space in the tower, representing more than half of the building’s 154,000 square feet.
That agreement, which calls for Davis Polk to move into the top five floors of the building, takes the occupancy rate from 10 percent to a little more than 60 percent, the outlet reported. (Volvo signed a ground-floor lease last year for 2,900 square feet for a Polestar electric car showroom.)
Teams from CBRE brokered both sides of the sale, while a team from Newmark represented Davis Polk with the lease.
The sale represents the good and the bad of the D.C. office market, with premium properties likely to generate interest — although at a lower prices, as evidence in the sale’s $388 per square foot indicates — while other commercial properties may struggle, the Journal said.
Indeed, the vacancy rate in the central hub of D.C. is about 22 percent, with about 20 million square feet of empty space, the Journal said, citing data from CBRE. Interest in newer office buildings remains strong, while other older spaces are more distressed.
The office market has struggled enough for Mayor Muriel Bowser to call on the Biden administration to either end allowing federal employees to work from home or, alternatively, turn over vacant office space to the city to convert into affordable housing.
Bowser said converting office buildings into housing could help lure 100,000 new residents in the upcoming years as part of a “reimagined” downtown area.
Office-to-housing conversions have been slow, however, with just 218 projects completed nationwide between 2016 and 2021, and an additional 42 in 2022, ABC News reported, citing data from CBRE.
— Ted Glanzer