Investors Move Cautiously in Nation’s Capital

You know it’s a tough market when even Washington, D.C., is affected. Yes, even the long recession-resistant center of government has seen a reduction in real estate investment sales, as speakers affirmed during the investment panel at CPN’s Washington, D.C. Property Opportunities conference on Nov. 18. In fact, sales are down 60 percent from this time a year ago, according to session moderator William Prutting Jr., senior vice president of CB Richard Ellis Inc., and there have been no transactions over $30 million for the first time in 10 years. Some investors are still keeping an eye out for opportunities and have even closed deals, but among some of the most active, Tom Regnell, senior vice president of acquisitions for Washington Real Estate Investment Trust, termed his strategy as “monitoring the market,” while Michael Brodsky, founder & principal of The Goldstar Group Inc., is looking at options on the debt side. On the other hand, Wistar Wood, director of the direct investment group for AEW Capital Management L.P., noted his company’s need to invest but the difficulty of finding deals in the “Death Valley” between core properties and opportunistic deals. In determining the right price, Wood said his company is much more focused now on the market rent as that has shifted and on cost to ensure it isn’t above replacement cost. Warned Regnell: “In this market, even the deals you don’t think have hair have hair.” The best markets, according to the panelists, are in the more urban areas. Wood pointed to Bethesda and Tysons Corner, as well as the Washington CBD and the East End. The conference also featured a one-on-one discussion between David Winstead, commissioner of the Public Buildings Service for the General Services Administration, and Robert Peck, a former commissioner and currently managing director of tenant representation for Jones Lang LaSalle Inc., as well as a macro- versus microeconomic analysis by economists Stephen Fuller, Dwight Schar Faculty Chair, professor and director of the School of Public Policy’s Center for Regional Analysis at George Mason University, and Lawrence Yun, chief economist & senior vice president of research at the National Association of Realtors, moderated by William Collins, senior managing director of Cassidy & Pinkard Colliers. In addition, a panel led by William Hudnut III, senior resident fellow & Joseph C. Canizaro Chair for Public Policy at the Urban Land Institute, examined opportunities arising in the Washington, D.C., metropolitan area following the presidential election. While panelists do not expect significant changes, they noted the influx of people as a result that help to buoy the market and the simple fact of a change in the White House as a positive influence on Congress. They also pointed to the significant number of agencies involved in financial regulation that are likely to need more space. Panelists included Timothy Hutchens, executive vice president & head of the federal government services group at CB Richard Ellis Inc.; Peter Larson III, executive vice president of tenant advisory services at Transwestern; Neil Levy, executive managing director at Studley Inc.; and Thomas Olmstead, vice president & national director of government programs for Opus Group.For further insights from David Winstead, William Hudnut and William Collins, click here to access the Conference Series section of CPN Radio.