The Long View

For the Best Real Estate Brokers, Patience Is a Virtue: Deals Can Take as Long as Half a Decade to Complete.

VIEWS 'R US: TENANTS WILL BEGIN OCCUPYING 101 CONSTITUTION AVENUE THIS MONTH - BUT THE DEAL'S BEEN IN THE WORKS FOR YEARS

What Washington office space has the best view in town, plus all the perks of a brand-new trophy building? Just delivered 101 Constitution Avenue takes the prize, and tenants start moving in this month. Head to the nicely finished circular rooftop terrace of this sleek, modern building and you'll see a sweeping, panoramic vista that includes up-close views of the U.S. Capitol in one direction and stately Constitution Avenue in the other, from the National Gallery to the Washington Monument and beyond. It's the closest privately owned office building to the Capitol and clearly bespeaks Washington power.

It's no surprise that heavy hitters willing to pay top dollar are moving into the 10-story, 500,000-square-foot-space owned by the Trustees of the United Brotherhood of Carpenters and Joiners of America. The property, developed by American Realty Advisors, will boast a deep-pocketed tenant lineup, including Philip Morris and prominent DC-based lobbying firm Van Scoyoc Associates. Who wouldn't want to work in a building that offers a fitness club for tenants, private balconies, a grand two-story lobby with brushed stainless steel detailing, floor-to-ceiling windows and more parking than the average? And that finished rooftop is undoubtedly prime-time party space. Word is that a white-tablecloth restaurant also will make 101 its home (appropriately, we're talking an upscale steakhouse that might cater rooftop events, which could give the Capital Grille a run for its money as a hobnobery for the political steak-eating set). The view is so stunningly Washington that a handful of television networks have expressed interest in leasing space, to include a rooftop studio from which they could broadcast with the Capitol shining brightly as a backdrop.

So, what does it take to get into a high-end trophy building like 101 Constitution? First, of course, comes top-dollar rent. Only a handful of luxurious, Class A trophy buildings are delivered in Washington each year, and rents at these top-of-the-line buildings generally start in the $50s per square foot. But there are takers - tenants willing to pay extra for something special, even in an economy that breeds caution and hesitation. H. Stewart Van Scoyoc, president and founder of Van Scoyoc Associates, couldn't be happier about his upcoming move to 101 Constitution, where he's starting out with 45,000 square feet on the sixth floor priced in the low $50s. "It's a perfect fit for us because the majority of what we do is focused on Congress," he says. "I'm going to have an office out on the rotunda [prime views], with one of the best conference rooms in the city." At press time, 101 Constitution was about 63 percent preleased, with about 180,000 square feet still available, says Vernon Knarr, senior managing director at Julian J. Studley, who leads the building's leasing team.

But beyond money, starting early with a good broker is essential in the game of commercial real estate, especially for companies seeking a large amount of space. "The bigger you are, the more time you need," explains Tom Fulcher, senior vice president at Studley. "The bigger you get, the more complicated your problems are," he adds. Fulcher is representing Wilmer, Cutler & Pickering in the white-shoe law firm's search for about 450,000 square feet of new space - and he thinks the deal eventually may evolve into as much as 700,000 square feet. Wilmer's lease isn't up until 2008, but Fulcher already is canvassing the market and has been prowling for more than a year.

So, how far out should you plan? If you're in the market for just 10,000 square feet, start about eight to nine months in advance. For 50,000 square feet, you'll probably need at least a year and a half. For 200,000 square feet, it's best to start three to four years in advance, and you may want to consider preleasing in a building to be built or redeveloped.

In the summer of 1998, law firm Sidley & Austin signed a lease for 190,000 square feet in the Investment Building at 15th and K Streets - about 50 percent of the building. The Kaempfer Company was redeveloping the space with the help of renowned architect Cesar Pelli, who transformed the 1924 beaux arts building into a 12-story, Class A luxury property complete with a soaring interior atrium. Getting in early and anchoring the building (which was delivered in August 2001) allowed Sidley & Austin first dibs on picking space. Rather than taking the top floors for best views, the firm went for floors six through ten and a portion of five, which allowed them to use a sixth-floor "super level" (ceiling heights of more than 15 feet) to develop a lobby of its own. Step off the elevator into Sidley's space and you'll see the result: essentially, a building within a building, which the firm has outfitted with a private cafeteria, a full-service library and an enormous mock courtroom used for trial preparation. And Sidley employees can, of course, enjoy the trophy amenities at the Investment Building (currently 90 percent leased): a fitness room, full-time concierge service and finished rooftop great for warm-weather lunch breaks.

But how to navigate the sometimes daunting, sometimes discouraging process of finding the best available commercial real estate to suit your firm's or company's changing needs? Pick an experienced broker and let him (or her) lead you through the various steps. A good broker will go well beyond merely identifying locations that suit client needs. Drawing on their up-to-date knowledge of current market conditions and past experience, brokers can narrow the playing field and negotiate on behalf of their client, review pros and cons of various properties and explain prices as well as risks and additional costs so no surprises pop up down the road.

"There's an enormous amount of effort and energy that goes into this," explains Audrey Cramer, executive vice president of Cushman & Wakefield, who represented law firm Latham & Watkins in its move last March to the top seven floors (covering approximately 184,000 square feet) of Lincoln Square located at 555 Eleventh Street, NW. Initially, 83 sites were considered. Then, "We negotiated on fourteen sites, narrowed the list to four, did architectural plans and ended up going into final negotiations on two," recalls Cramer. "The final negotiations on the building they picked went on for nine months, during which we pulled four all-nighters, and we signed the deal 20 minutes before the groundbreaking of the building." Whether the owner could have even persisted with the groundbreaking without Latham's signature is an open question.

A good broker has a solid understanding of economics and finance and will assist clients in developing a sensible, sometimes creative, long-term strategy. Lois Zambo, executive vice president of Studley, did just that with Gannett, when it was a 600,000-square-foot tenant with a 20-year lease (expiring in 2001) in the Rosslyn buildings sometimes referred to as DC's twin towers. "About 10 years ago, we started tracking the markets and every single year I gave them a complete overview of rents and ground prices," says Zambo. About seven years ago, Zambo and Gannett decided it was an appropriate time to buy something further out in Virginia, where land prices were at the bottom of the market. "They couldn't give the ground away then," says Zambo. "The only way they [Gannett] could have leverage if they chose to stay when their lease came due was to be able to have an option where they could move to." Zambo knew that the only alternative for a 600,000-square foot client in the Washington area was "controlling ground where they could build." So, the company negotiated price for the ground, developed an exit strategy (what could the ground be sold for in five years?) and approached its landlord, who simply didn't believe the giant tenant would move. Considering the expiration date of the lease and the amount of time it would take to build new space, Zambo and Gannett determined the crucial decision time, which was about three years ago. If Gannett was going to move, construction needed to begin (and once that happened, a stay-put option no longer remained). Of course, in the end, Gannett didn't renegotiate the lease and instead built a giant complex of its own in Tysons Corner. Now, the corporate headquarters enjoys 800,000 square feet of building space with room to add 600,000 more, complete with a helicopter landing pad, two volleyball courts, a tennis court and more. "Originally, they never wanted to move," reflects Zambo.

Gannett's bluff, with the help of a good broker, had paid off.