Early Briefing: Commercial Real Estate Feels the Pain
It's Monday, which means the Business section goes all local.
*In April, when a wealthy Irish investor bought the I.M. Pei-designed building at 2099 Pennsylvania Ave. NW for $173 million, or $867 a square foot -- a record for the District -- it appeared that the region's cachet and a weak dollar might keep the commercial real estate deals rolling.
But like much of the rest of the nation, the commercial real estate sector has been hit by the double whammy of a credit crunch and an economic slowdown. In the District, $1.4 billion worth of office space traded hands in the first six months of the year, a 61 percent drop from the $3.6 billion sold by mid-2007, according to Real Capital Analytics of New York. The drop-off was even more pronounced in Northern Virginia, where building sales plummeted 87 percent, to $914 million from an all-time high of $6.8 billion. In Maryland's suburbs, building sales fell 13 percent, to $459 million from $527 million.
*It wasn't long ago that real estate developers could build a golf course community and collect a $30,000 premium from customers who might not have even played golf, but aspired to the country club lifestyle.
Not anymore. Projects have been put on hold or canceled because potential buyers are no longer willing to pay extra, can't qualify for a mortgage or can't sell their homes to trade up. Courses that were too far along to stop are struggling to find customers.
*About 880,000 square feet of office space in NoMa, or about 10.4 percent of the total market, sits vacant, according to Bethesda-based CoStar. At least two completed buildings have no tenants. An additional 2.7 million square feet of office space are on their way, part of a wave of buildings financed during the boom, now being completed in the midst of an economic downturn.
Developers said interest in the area has picked up following announcements by NPR and the Justice Department that they're moving in. But leasing has become increasingly difficult throughout the Washington area, and that could slow plans to use commercial real estate as a catalyst for transforming once-blighted neighborhoods such as NoMa, brokers said.
*Nine start-up Web companies were unveiled last week at an event in Reston organized by new local technology group LaunchBox Digital. The organization is trying to cultivate the scene for the area's technology start-ups by connecting them with experienced entrepreneurs and venture capitalists who can provide coaching on how to build a business.
"There was a lot more early-stage talent and ideas than there were vehicles to get them going," said co-founder Julius Genachowski, a former top executive with Barry Diller's IAC/InterActiveCorp. "We said there's really an opportunity to create a destination for cutting-edge talent and ideas in this region."
The event drew about 65 investors from Washington, New York and Boston, including high-profile firms such as Columbia Capital of Alexandria, to scout the companies LaunchBox had selected from 250 applicants.
*Fred Malek, the Washington private-equity tycoon who ran Northwest Airlines and Marriott Hotels, is after the Chicago Cubs baseball team. Malek, 71, has joined up with former Washington Nationals president Tony Tavares, former congressman and Republican vice presidential candidate Jack Kemp, home-run king Henry "Hammerin' Hank" Aaron , and New York City taxicab king Andrew Murstein in a bid to buy the legendary Chicago franchise.
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