Mason Master’s in Real Estate Students Learn to Turn “B” Office Into “A” Space
by Bob Wulff, Director, Center for Real Estate Entrepreneurship
The DC Region’s office market is now in a recession. The spectacular success of trophy buildings in “A” locations has camouflaged the very high vacancies virtually everywhere elsewhere. But office developers and owners are painfully aware that many of their “B” office buildings (and “A” buildings in “B” locations) are now obsolete and must be repositioned to remain economically useful.
That’s why the 2015 Summer Case Study Tour series titled “How to Reposition Failed Office Buildings” was a sold out success. Sponsored and organized by George Mason’s Center for Real Estate Entrepreneurship (CREE), the three on-site case studies highlighted successful repositioning strategies by office building owners.
Transforming Under-Performing Office to Boutique Hotel:
The Penelope Project in Dupont Circle
Building owner, Endeka Enterprises, explained their re-positioning decision tree as they cycled through a series of rejected uses ranging from eight large condos to 21 micro-rental units. A master lease offer from a European boutique hotel chain was the winning reuse based on the owner’s low risk profile. The challenging architectural transformation from office floor plates to 350 square foot hotel rooms generated much discussion among Mason MS in Real Estate Development students in attendance.
Creating a Trophy Property from “B” Office:
The Silverline Center in Tysons
Washington Real Estate Investment Trust owned an aging but prominently located “B” office in Tysons. The opening of the new Silverline METRO station and HOT lanes created an “A” location. The owners candidly discussed their cost/benefit calculations used to decide the mix of new amenities and the redesign necessary to maximize rebranding and higher rents. The audience was especially interested in the dramatic facadectemy including 270 LED lights that can be individually programmed. The $34,000,000 repositioning is complete and successfully leasing at “A” rents.
Not ready to risk $25 million to reposition your “B” building in a B- location where traditional office tenants are disappearing or downsizing? Why not quit chasing traditional tenants, reinvent your office space and appeal to heretofore untapped tenant base? This is coworking: members (not tenants) who join a collaborative community; license a chair or office by the month and choose from a long list of a la carte amenities. A leading provider of coworking space in the DC region is UberOffices (not related to Uber Transport). Founder and CEO Raymond Rahbar explained to a standing-room-only crowd the inner workings of his 30,000 SF of cowork space in Dupont–occupied by 450 members representing 130 companies. It’s one of eight Uber properties in the DC region.
“CREE’s case study tour series embeds our master’s in real estate students into the real estate community,” says Bob Wulff, “but other area professionals have found the tours to be very helpful as well, so we now get a stimulating mix of younger students and seasoned practitioners. We have clearly found a successful formula.”
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