Developers Plans to Build for Smaller Tenants
Cleary, Mike, The Washington Times (Washington, DC)
Big tenants with six-digit leases are the order of the day in the current real estate economy, but some developers think the time is ideal for serving small tenants, 20,000 square feet and under.
The Long Property Co. plans to build two mid-rise buildings aimed at such tenants in Westfields, the huge commercial office park that founder Henry Long started next to Chantilly. Westfields is now occupied by such large tenants as the National Reconnaissance Office, TASC, Newbridge Networks and Aerospace Corp.
The 90,000-square-foot buildings, consisting of four stories and a penthouse, would go up at Newbrook Drive and Westfields Boulevard, said Brian Selfe, vice president with Long. The floors would be 20,000 square feet, suitable for smaller tenants. Long has filed site plans and hopes to obtain permits and start construction by the fourth quarter, he said. The project would be called the Ponds at Westfields.
The company plans to start their first building speculatively, which means without lining up tenants first.
"We think there's a niche there," Mr. Selfe said.
"Today a 20,000-foot user is small potatoes. I can make him a big fish, give him signage and things that we don't see those tenants getting in this market."
The vibrant real estate market has made it harder for small tenants to find space, real estate officials said.
"Small space is difficult because the demand is so great," said Gerald Gordon, executive director of the Fairfax County Economic Development Corp. In Fairfax County, which has 90 million square feet of office space, the vacancy rate is down to 4 percent or less, he said.
"When a small block comes available, it's snapped up," he said.
There's more than one reason for the problem, said William Tidwell, a broker with Cushman & Wakefield. Larger leases fill buildings faster, which has made it harder for small tenants to find space, he said. And there are more firms starting up, increasing the competition for space, he said.
Long first picked up the idea to build for smaller tenants in late 1998. To decide if the project was worthwhile, it researched leases at 78 new buildings completed in 1998 and early 1999 and in markets where it saw most of the high-tech growth occurring.
Looking at projects in Fairfax, Reston, Herndon, Westfields, and Loudoun County, but not Tysons Corner, they found 135 tenants taking 8 million square feet of space, Mr. Selfe said.
That showed an average tenant size of 52,000 square feet. Tenants who took 20,000 square feet accounted for just 7.8 percent of the space. Still, that amounted to more than 600,000 square feet.
"My brokers, they see as much as 300,000 square feet worth of prospects," Mr. Selfe said, explaining their decision to go ahead with the initial 90,000-square-foot building. …