DC RISING MAGAZINE

DC Rising A publication of Sokol Media, Inc.

Covering D.C./Maryland/Virginia

PARAMOUNT GROUP

Green from the Ground Up

1899 Pennsylvania Avenue

Congratulations Paramount Group

on your success in creating Eco-Friendly Buildings!

Sokol Media, LLC

Publisher’s Page W

elcome to DC Rising magazine, sister publication to NY Residential and South Florida Residential magazines.

FOUNDER & PUBLISHER Lori M. Sokol ART DIRECTOR Kerstin Vogdes Diehn

While DC Rising will be similar to these two other publications by reaching real estate developers, building owners and managers, architects, engineers, real estate attorneys and leading real estate brokers in the region it serves, it will be different since it will provide coverage of BOTH the Residential and Commercial real estate arenas.

PUBLISHING CONSULTANT James Janson CONTRIBUTING WRITER Faith Hope Consolo

Launching with a circulation of 10,000, DC Rising will be sent individually to each recipient, and will also be distributed at leading industry events throughout the year. With a scheduled launch in October 2015 featuring the NoMa Business Improvement District as its Cover Story, we are looking forward to continually providing the DC region with cutting-edge news, trends and analysis about the latest deals, the most notable projects, and the people who are making it all happen.

COPYWRITER/ RESEARCH ASSISTANT Jason H. Greenberg WEB DESIGN Design Disegno ACCOUNTING Citrin Cooperman

Upcoming bi-monthly issues will also feature columns from industry experts in a variety of real estate arenas including development, construction, sustainability, architecture, engineering, and the law. Please contact me at the email address below if you would like to submit content on any of the above topics.

PRINTING AmericasPrinter Sokol Media, LLC 75 West End Avenue, #P15F New York, NY 10023 Ph: 973-769-7012 www.sokolmediaonline.com

We hope you enjoy reading our publication, and look forward to your participation and feedback on an industry that is clearly ‘on the rise.’

Lori Sokol, Ph.D. Founder & Publisher Please address all comments and questions to lori@sokolmediaonline.com

Copyright by Sokol Media, LLC. No part of the publication may be reproduced or transmitted in any form or by any means without prior written consent from the publisher. The publisher reserves the right to accept or reject any advertising or editorial materials. Advertisers and/or their agents assume the responsibility for all content of published advertisements and assume responsibility for any claims against the published based upon the advertisement. Editorial contributors assume any claims against the publisher based on the published work. No part of this publication may be reproduced in any form or by any electronic ormechanical means, including information storage and retrieval systems without permission in writing from the publisher. All items submitted to Sokol Media, LLC. become the sole property of Sokol Media, LLC. Editorial content may not necessarily reflect the views of the publisher. All correspondence and inquiries should be addressed to: Sokol Media, LLC., 75 West End Avenue, #P15F, New York, NY 10023.

Contents 1

PUBLISHER’S PAGE

Welcome to DC Rising

2

INDUSTRY NEWS The Mandarin Oriental’s Empress Lounge Steps Outdoors, while the East End Welcomes Farmers Restaurant

4

COVER STORY The Paramount Group has made its Entire Portfolio Green, from DC to NYC

12

SPECIAL FEATURE DC Market Snapshot, 2nd Quarter, 2015 From the Office to Multi-Family

16

CALENDAR Upcoming Industry Events in 2015 www.sokolmediaonline.com • 1

INDUSTRY NEWS

MANDARIN ORIENTAL, WASHINGTON DC OFFERS NEW OUTDOOR EXPERIENCE AT EMPRESS LOUNGE In celebration of the new terrace opening, Empress Lounge offers a taste of Napa Valley wines at outdoor pairing event MANDARIN ORIENTAL, Washington DC has completed a full renovation of the terrace at Empress Lounge to now offer additional seating, fire pits, exclusive menu options and much more. To celebrate the opening of the new garden oasis, Empress Lounge presentsA Perfect Pairing, an evening event with Duckhorn Vineyards, Napa Valley Premier Wines on April 30 from 5:30 to 7:30 p.m.

A Perfect Pairing will take place on the lounge’s newly renovated outdoor terrace, where guests will indulge in a selection of Duckhorn’s wines each paired with the perfect dish from Mandarin Oriental, Washington DC’s recently appointed Executive Chef, Adam Tanner. Guests also will be able to mingle with Scott Finaly, the East Coast Director of Operations for Duckhorn, while enjoying lively musical entertainment in the hotel’s beautiful garden overlooking the Tidal Basin. Tickets are USD 35* per person and also include a special take-home gift from Duckhorn Vineyards.

Empress Lounge will continue A Perfect Pairing events every other Thursday throughout the summer with different partners each time.

To enjoy alfresco intimacy in a refined atmosphere, Empress Lounge’s terrace transformation allows for additional seating in comfortable couches and chairs, features large fire pits, and offers a new terrace menu with seasonal, outdoor favorites including a S’mores & Bubbles pairing, Grilled Peaches & Goat Cheese and the lounge’s signature Peach Sangria. The terrace is open 2 p.m. to 12 a.m. daily.

For additional information or to make reservations for A Perfect Pairing, guests may call +1 (202) 787 6140. A credit card is required at time of booking but no charges will be made until the day of the event. Cancellation within 48 hours of the event will result in a fee for the full ticket amount.

FARMERS RESTAURANT GROUP SIGNS 12,000 SF LEASE AT 600 MASSACHUSETTS AVENUE IN WASHINGTON, DC DTZ, a global leader in commercial real estate services, today announced that Farmers Restaurant Group has leased 12,000 square feet of space at 600 Massachusetts Avenue, NW Washington, DC for its newest restaurant, Farmers & Distillers. The new concept restaurant will join others in the portfolio including Founding Farmers and Farmers Fishers Bakers. John Asadoorian of Asadoorian Retail Solutions represented the building’s co-owners, Gould Property Company and Oxford Properties Group, in the transaction.

Farmers & Distillers will feature a concourse level and ground floor with a total of 300 seats.

600 Massachusetts Avenue is a 400,000 square foot building in the East End submarket of Washington, DC and features nearby restaurants, hotels, convenient public transportation, shopping, sports venues and museums.

The building is dedicated to environmentally friendly practices and is designed to achieve LEED Platinum with the U.S. Green Building Council. The building will feature Class-A office space, a two-story glass atrium in the

2 • www.sokolmediaonline.com

lobby with stone flooring, and a four-story atrium from the second floor ascending to the fifth floor. The primary roof will incorporate green spaces with planters and heavy vegetation, and offer views of the Capitol and the Washington Monument. For more information please visit www.600massachusettsavenue.com.

“We are delighted to welcome Farmers & Distillers to 600 Mass Ave, which will be a great contribution to our building and neighborhood,” said Kingdon Gould,III of Gould Property Company. “We are looking forward to a very longterm relationship with this fantastic restaurant group.”

Vice Chairman Phillip S. Thomas, Jr., Managing Director Kerri Mulligan Salih and Associate Callie Clemons of DTZ provide Project Office Leasing services in representation of the building’s co-owners, Gould Property Company and Oxford Properties Group.

600 Mass has 127,000 SF of space currently available with other pre-leases in the works. The building delivers third quarter 2016 with the restaurant opening that fall.

INDUSTRY NEWS

MCKELVY TO BECOME PRESIDENT AND CEO OF GILBANE BUILDING COMPANY GILBANE BUILDING COMPANY, a global and award-winning leader in construction and facilitiesrelated services, announced that Michael McKelvy will assume the position of President and Chief Executive Officer effective January 1, 2016.

McKelvy currently serves as President and Chief Operating Officer. He will succeed present Chairman and Chief Executive Officer Thomas F. Gilbane, Jr., who will remain as Chairman of Gilbane Building Company and the Chairman and Chief Executive Officer of Gilbane, Inc., a holding company with two principal subsidiaries, Gilbane Building Company and Gilbane Development Company.

MikeMcKelvy_QuoteMr. McKelvy joined Gilbane in 2014 following a 26year career with CH2M Hill.

As President and CEO of Gilbane Building Company, Mike will assume responsibility for directing the organization’s growth while ensuring profitable operations and maintaining Gilbane’s unique culture and commitment to its clients.

McKelvy commented, “I am honored and excited to lead the Gilbane team. The commitment of everyone in this company to integrity, client service and above all safety is what makes our organization special. Our 2,600 employees are the foundation of our success. I look forward to continuing to work with Tom, the Board and the management team to achieve future goals and write the next chapter in our 142-year history.”

A Registered Architect in 16 U.S. states, McKelvy holds a Bachelor of Science Degree in Environmental Design from Oklahoma University, a Bachelor of Architecture Degree from Louisiana Tech University and has completed advanced executive management programs at the University of Chicago’s Booth School of

Management and Stanford University.

Thomas Gilbane, Jr. joined Gilbane full-time in 1970. He was appointed Vice President/Regional Manager in 1976, Executive Vice President and Chief Operations Officer in 1983, President and Chief Operating Officer in 1997, and Chairman and Chief Executive Officer in 2004. In 2008, Mr. Gilbane became President and Chief Executive Officer of Gilbane, Inc. and Chairman and Chief Executive Officer in 2010.

During his 45 years of service to Gilbane, Tom has been a driving force in the Company’s expansion both domestically and overseas. The current geographic footprint of Gilbane now includes more than 50 U.S. and international offices and an operating volume of approximately $4 billion.

Under his leadership, Gilbane implemented a “one company” operating philosophy that maximizes the organization’s resources and expertise on projects and business pursuits.

As Chairman of Gilbane Build-

ing Company and the Chairman and CEO of Gilbane, Inc., Tom will continue to set the strategy and goals for the parent entity working in collaboration with the Board of Directors and the executive leadership teams of both organizations—Gilbane Building Company and Gilbane Development Company.

Mr. Gilbane was recently elected Chairman of the Construction Industry Round Table Board. Additionally, he is Chairman of the ACE Mentor Program of America, a member of the National Academy of Construction and a Babson College Trustee.

“Mike truly understands who we are as a Company and is a perfect fit to lead our organization going forward,” said Gilbane. “I am excited about the possibilities that lie ahead for our company and its people, and look forward to working with Mike and the leadership team as we stay committed to delivering outstanding service to our clients and continually growing as a private, family-owned business.”

www.sokolmediaonline.com • 3

PARAMOUNT GROUP Green

from the

“I don’t know of any other firm that has made the decision to make its entire portfolio LEED certified,” says Ralph DiRuggiero, SVP of Property Management for Paramount Group, Inc. (PGI), “And we got it done in only 18 months.” Paramount’s ability to do so much, and so quickly, is a true testament to the firm’s long-admired reputation as a market leader in sustainability. Recognized extensively for reducing its portfolio’s energy usage by 14.8% since 2007, PGI can also now lay claim to a total reduction in greenhouse gas emissions of more than 13,000 metric tons of CO2 per annum. And this has been primarily accomplished by remaining at the forefront of utilizing innovative technologies such as real-time energy monitoring, and by participating in an automated demand response program.

PGI’s achievements in sustainability are not surprising given the firm’s success in so many other arenas. A real estate investment and management firm with expertise in acquisition, finance, disposition, property management, leasing, and construction, PGI is one of the largest privately-owned real estate companies headquartered in New York City. For several decades and through numerous market cycles, PGI has continuously provided first class properties, services, and amenities to its tenants, as evidenced in the company’s current 14.25 million-square-foot portfolio of trophy office buildings in New York, Washington, DC and San Francisco (presently valued in excess of $11 billion). But one of the things the firm is most proud of is, that in just a few short years, most of their portfolio has received an Energy Star label, while

712 Fifth Avenue 4 • www.sokolmediaonline.com

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Caption

60 Wall Street 31 West 52nd Street

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increasing its portfolio-wide Energy Star rating from 69 to 79 (a 15% increase). “This sizeable increase exemplifies our company’s unparalleled focus, drive and know-how,” Ralph says.

More specifically, PGI has accomplished the following outstanding initiatives: • It has received the Energy Star’s Leaders Designation, and is one of only 22 real estate companies to receive this, while also receiving a Top Performer Designation in 2013.

• PGI currently has applied for 8 Energy Star Designations for 2013, 745 Fifth Avenue and has achieved 12 LEED Certifications with the remainder of the portfolio either under review or finalizing their performance periods.

• PGI’s current ES rating portfoliowide is 79. Note: Due to new ES guidelines regarding data centers electric usage, the rating might drop but their energy reductions will not.

• In the first 5 months of 2013, PGI’s portfolio-wide recycling rate was 75.2%.

• Its sustainability Website is ready to be launched.

• Real-time steam monitoring is up and running at all NY properties.

(Does not apply to DC or OMP, Chiller monitoring.) New chiller control panels at 1301 and 1633 are up and running, which has reduced steam consumption by over 25% in comparison to its five-year average.

• Real-time energy monitoring platform is now online for NYC properties 1899 Penn, and Liberty Place.

Waterview and 425 are awaiting utility tie-ins.

• Retro commissioning for NYC properties has been completed.

(This will also satisfy NYC LL87 requirements for 10 years.)

The implementation of energy saving projects is also ongoing.

• 440 9th Avenue will start burning number 4 oil, which will increase our ES score at the property.

• During 2012, PGI reduced its portfolio-wide electric consumption by over 9 million KWHRs, which translates into a savings of over $2.8 million compared to the forecasted budget.

• PGI’s Auto Demand Response pilot program test started in mid July.

• PGI started an LED lighting retrofit at OMP, and is awaiting new rebate requirements for the NYC market. These retrofits have less than a 1.5 year payback.

• PGI has implemented a 1st Phase Green construction guideline, and continues to explore Green Lease language.

6 • www.sokolmediaonline.com

NYC BENEFITS But perhaps the best way to illustrate PGI’s success in reducing a building’s energy consumption is to look at some of the sustainability initiatives incorporated into the buildings themselves.

In their NYC portfolio, 900 Third has reached another milestone by being one of only a handful of properties in the NYC area to achieve recertification status under the latest version of LEED for Existing Buildings. The building was Certified under version 2.2 in 2011 and after implementing energy saving projects and following the LEED guidelines, reapplied for certification and was awarded GOLD certification under LEED version 3.0. The building, which has achieved an Energy Star Rating of 84, features a light-filled floor plate of approximately 18,000 square feet, and digital temperature control systems and HVAC service on an individual floor-by-floor basis, which is tenant controlled.

At 1325 Avenue of Americas, which was awarded LEED Silver and an Energy Star Rating of 80, the building underwent a VFD installation, complete lighting retrofit, BMS upgrade, urinal upgrades, and the implementation of state-of-the-art HVAC and Class “E” Life Safety Systems. Similarly, at 712 Fifth Avenue, the building earned an Energy Star Rating of 80 and Silver LEED status, while also undergoing a VFD installation and complete lighting retrofit. Further, at 31 West 52nd Street, PGI enabled this building to achieve an Energy Star Rating of 88, and was awarded Silver LEED Status upon installation of a new chiller monitoring package.

No stranger to first-class office space, PGI successfully retrofitted 440 Ninth Avenue, which stands prominently on the southeast corner of 35th Street and Ninth Avenue graced by a buff-colored brick and terra cotta exterior. Tenants can now benefit from an office-controlled HVAC system, a lighting retrofit, and upgrades to its boiler, all enabling it to attain an Energy Star Rating of 79. Another first-class office space, standing at 1301 Avenue of the Americas and designed by world-renowned architectural firm Skidmore, Owings & Merrill, achieved an Energy Star Rating of 76 as a result of PGI’s VFD installation and complete lighting retrofit, while at 1633 Broadway, PGI’s retrofitting of a VFD installation, lighting retrofit, and BMS upgrade enabled it to achieve an Energy Star Rating of 70.

CURRENT ENERGY STAR RATING

ELIGIBILITY FOR ENERGY STAR

900 Third Avenue

84

Application for 2013 Award in process

Attempting recertification for Gold status

1325 Avenue of the Americas

80

Application for 2013 Award in process

VFD installation, Completed lighting retrofit, BMS upgrade, urinal upgrades

Liberty Place

79

Application for 2013 Award in process

We are in the process of reviewing additional Energy saving measures

1899 Penn.

Avenue

80

Received 2012 Rating

Lighting retrofit, commissioning of building systems

425 I Street

98

Application for 2013 Award in process

Awarded Gold for Core and Shell Awarded Silver for Commercial interiors

PROPERTY

LEED STATUS

PROJECTS

Waterview

98

Received 2012 Award

Lighting retrofit resulting in a 12.5% energy reduction on all garage levels, estimated savings $10,000 p.a., composting program, enrolled in the Green Games for Arlington County, VA.

One Market Plaza

80

Received 2012 Award

VFD installation on chillers, low flow plumbing fixtures completed in Spear Tower, occupancy sensors for stairways, relamping of lobby lighting.

712 Fifth Avenue

86

Received 2013 Award

VFD installation, lighting retrofit

31 West 52nd Street

88

Application for 2013 Award in process

New chiller monitoring package installed

745 Fifth Avenue

70

No

Lighting retrofits, BMS upgrade

2099 Penn.

Avenue

83

Received 2012 Award

N/A

We will attempt LEED status during construction

440 Ninth Avenue

79

Received 2013 Award

Getting ready for filing

Lighting retrofit, boiler upgrades scheduled for 2013

1301 Avenue of the Americas

76

Application for 2013 Award in process

VFD installation, lighting retrofit

1633 Broadway

70

No

VFD installation, lighting retrofit, BMS upgrade

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CNBB

440 Ninth Avenue

425 Eye Street

WASHINGTON, DC

1301 Sixth Avenue

PGI’s success in enabling buildings to lower their carbon footprint is not unique to New York City, however. Its footprint is also clearly evidenced in Washington, DC, where PGI enabled Liberty Plaza to achieve LEED Silver status and an Energy Star Rating of 79. Similarly, PGI made it possible for 1899 Pennsylvania Avenue NW to achieve LEED Silver Status and an Energy Star Rating of 80 by providing a lighting retrofit and the commissioning of building systems; while at 425 Eye Street, PGI’s energy-reducing implementation enabled it to achieve LEED Gold for its core and shell, and LEED Silver for its commercial interiors.

Uniquely positioned on the banks of the Potomac River in Arlington, Virginia, Waterview, a 24-story, 634,000 sq. ft. trophy-class office tower has also benefitted from PGI’s sustainability efforts having had its energy reduction on all garage levels reduced by 12.5% through PGU’s lighting retrofit, which is estimated to have saved the building $10,000. www.sokolmediaonline.com • 9

< One Market Plaza Waterview >

< 1633 Broadway 2099 Pennsylvania Avenue

> Liberty Place 1899 Pennsylvania Avenue

SAN FRANCISCO Still, PGI’s success in reducing a building’s carbon footprint is not limited to the East Coast. In San Francisco, One Market Plaza, comprised of two landmark office towers totaling over 1.6 million sq. ft. of Class-A office and retail space, benefitted from PGI’s VFD installation on the building’s chillers, low flow plumbing fixtures completed in the Spear Tower, occupancy sensors for stairways, and the re-lamping of the lobby lighting.

All of these implementations enabled the building to earn LEED Gold Status and an Energy Star Rating of 80.

“As one of only 22 companies in the U.S. designated as an Energy Star leader, we owe a lot of our success to the coordination of our entire sustainability team,” Ralph says. “We are dedicated to delivering on our commitment to our buildings, as well to our investors. Everything we do is done with total company commitment. Management Matters.” And it shows, from building to building, from east to west.

10 • www.sokolmediaonline.com

STI_Green Matters Magazine_fin.pdf 1 8/27/2013 10:04:52 AM

WASHINGTON, DC

Office Market Snapshot Second Quarter • 2015

Economy

WASHINGTON, DC OFFICE

Economic Indicators Q2 14

Q2 15

DC Metro Employment

3.11M

3.17M

DC Metro Unemployment

5.0%

4.6%

U.S. Unemployment

6.1%

5.3%

Q2 14

Q2 15

Overall Vacancy

11.2%

11.0%

Net Absorption

(321K)

275K

12-Month Forecast

Market Indicators

Under Construction Average Asking Rent

1.5M

3.1M

$50.35

$50.12

12-Month Forecast

Market Overview

Net Absorption/Asking Rent 4Q TRAILING AVERAGE 4

$51

3

$50

2 $49 1 $48

0 -1

2010

2011

2012

2013

Net Absorption, MSF

2014

2015

$47

Asking Rent, $ PSF

Overall Vacancy 12%

11%

Historical Average = 10.7%

10%

9%

2010

2011

12 • www.sokolmediaonline.com

2012

2013

It is clear that after a lackluster year in 2014, the Washington, DC Metropolitan Region’s economy has returned to above average conditions. The DC Metro continues to register one of the lowest unemployment rates among major metros in the United States—4.6%. Since May of 2014, the region has added 59,000 nonfarm payroll jobs, 15,400 of them in the office-using sectors of Professional and Business Services, Information, Financial Activities, and Federal Government. This is quite impressive considering about 35,000 net new jobs are added in a typical year and in 2014, the region lost approximately 12,000 office-using jobs. In the District of Columbia (DC), the unemployment rate dropped 40 basis points from 7.7% in January 2015 to 7.3% in May of this year while nonfarm job growth is up over 13,000 jobs compared to a year ago. The Federal Government, which accounts for over 25% of nonfarm payrolls in DC, has continued to stabilize after four years of contraction, adding 1,400 jobs from May 2014 to May 2015 while Professional and Business Services employment is up nearly 5,000 jobs.

2014

2015

After a modest start to the year, the District of Columbia experienced strong positive demand in the second quarter of 2015, driven by the two core downtown submarkets: the Central Business District (CBD) and East End. In fact, these two submarkets captured 69% of the demand across Washington DC during the quarter. The CBD boasted the strongest demand with 125,400 sf of positive absorption, while the East End registered 64,300 sf. The divergence of the East End and CBD that began in the first quarter of the year seemed to take a halt during the second quarter. The majority of deals signed—both new deals and relocations—were for space in the same submarkets where tenants’ leases were previously.

After three straight quarters of rising vacancy, the District of Columbia’s vacancy rate ticked downward 30 basis points to 11.0%. Vacancy in the CBD dropped below 10% for the first time since the end of 2008. Leasing activity in the second quarter was dominated by larger deals in new construction or renovated buildings. Kirkland & Ellis signed a prelease for 186,000 sf at 1301 Pennsylvania Avenue, NW in the East End. As is the case with several other large law firms, Kirkland & Ellis will downsize by more than 60,000 sf upon delivery of the Pennsylvania Avenue building in 2018. Another large lease in new construction was that signed by Bracewell Giuliani at 2001 M Street, NW – currently undergoing a complete renovation. Following on the heels of its successful renovation of 799 9th Street which delivered in 2014 leased to two major law firms, Brookfield’s 2001 M Street, NW, has seen the most interest among all other major renovations throughout the District of Columbia. It is expected to deliver in 2016. Office buildings that are currently under construction are over 60% leased in the District of Columbia.

GSA activity was relatively light throughout the first half of the year, but is expected to pick up in the near future. A staggering 13 million square feet of federal leases are set to expire through 2019 in the District of Columbia and owners that can deliver large blocks of space that fit federal lease requirements are set to benefit. This activity could only have modest impacts on the overall vacancy rate in the District as most large prospectus level leases in the queue at this time are targeting space efficiencies in the 10 – 20% range with one for the Department of Education targeting a 42% space reduction.

WASHINGTON, DC

Office Market Snapshot Second Quarter • 2015

VACANCY AVAILABILITY CURRENT RATE RATE ABSORPTION

YTD ABSORPTION

TOTAL BLDG

INVENTORY

SUBLET VACANT

TOTAL VACANT

CBD

250

38,500,760

266,496

3,793,243

9.9%

14.2%

125,445

344,970

541,023

$50.67

East End

203

39,812,897

333,515

4,561,593

11.5%

20.6%

64,365

(231,657)

932,371

$54.36

UNDER CON- AVERAGE STRUCTION ASKING RENT

SUBMARKET

West End/Georgetown

58

5,921,127

25,905

706,882

11.9%

15.7%

3,214

28,680

0

$47.82

Capitol Hill

44

4,642,579

10,866

434,936

9.4%

16.2%

43,527

68,110

966,917

$56.88

NoMa

39

10,289,374

30,999

1,427,571

13.9%

15.6%

41,964

(1,215)

200,000

$48.20

Southwest

34

13,382,559

36,638

1,310,956

9.8%

16.3%

(9,499)

45,002

553,879

$44.84

Capitol Riverfront/Southeast

11

3,736,758

10,800

405,213

10.8%

16.0%

44,514

57,396

0

$41.94

Uptown

99

6,564,289

62,886

922,343

14.1%

19.0%

(38,397)

(61,157)

0

$40.78

738

122,850,343

778,105

13,562,737

11.0%

17.0%

275,133

250,129

3,194,190

$50.12

WASHINGTON, DC MARKET TOTALS TOTAL preliminary

Key Lease Transactions 2Q 2015 PROPERTY

SF

TENANT

TRANSACTION TYPE

SUBMARKET

1301 Pennsylvania Avenue, NW

186,000

Kirkland & Ellis

Prelease

East End

1111 19th Street, NW

70,482

Undisclosed Tenant

New

CBD

1299 Pennsylvania Avenue, NW

56,500

APCO

New

East End

2001 M Street, NW

55,000

Bracewell Giuliani

New

CBD

2450 N Street, NW

43,100

Cogent Communications

New

West End

1001 G Street, NW

42,844

Quadrangle Development Corp.

Renewal

East End

955 L'Enfant Plaza, SW

34,000

Veracity Engineering

New

Southwest

900 G Street, NW

33,216

American Legacy Foundation

New

East End

Key Sales Transactions 2Q 2015 PROPERTY

SF

SELLER/BUYER

PRICE

SUBMARKET

1101 K Street, NW

291,500

Rockefeller JV Mitsubishi / UBS Realty

$260,000,000

East End

1325 and 1341 G Street, NW

431,600

TIER REIT / Westbrook Partners

$200,000,000

East End

1750 K Street, NW

165,800

Sumitomo Corporation / Mirae Asset Global Management

$115,000,000

CBD

645 H Street, NE

84,700

Jair Lynch / Intercontinental Real Estate

$51,400,000

Capitol Hill

1140 19th Street, NW

71,100

AREP / Rockrose

$40,500,000

CBD

About DTZ DTZ is a global leader in commercial real estate services providing occupiers, tenants and investors around the world with a full spectrum of property solutions. The company’s core capabilities include agency leasing, tenant representation, corporate and global occupier services, property management, facilities management, facility services, capital markets, investment and asset management, valuation, research, consulting, and project and development management. DTZ provides property management for 1.9 billion square feet, or 171 million square meters, and facilities management for 1.3 billion square feet, or 124 million square meters. The company completed $63 billion in transaction volume globally in 2014 on behalf of institutional, corporate, government and private clients. Headquartered in Chicago, DTZ has more than 28,000 employees who operate across more than 260 offices in 50 countries and represent the company’s culture of excellence, client advocacy, integrity and collaboration.

Joseph Wood Research Analyst 2101 L Street, NW Suite 700 Washington, DC 20037 Tel: +1 202 266 1317 Fax: +1 202 223 2989 Email: joseph.wood@dtz.com

DTZ announced an agreement to merge with Cushman & Wakefield in a May 11 press release. The new company, which will operate under the Cushman & Wakefield brand, will have revenues over $5.5 billion, over 43,000 employees and will manage more than 4 billion square feet globally on behalf of institutional, corporate and private clients. The agreement is subject to customary closing conditions and is expected to close before the end of 2015. For further information, visit: www.

The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

dtz.com or follow us on Twitter @DTZ.

Copyright © 2015 DTZ. All rights reserved.

www.dtz.com | 2

www.sokolmediaonline.com • 13

WASHINGTON, DC

Multi-Family Snapshot First Quarter • 2015

Market Tracker *Arrows = Current Qtr Trend

Vacancy

Net Absorption

Completions

Asking Rent

4.8%

2,032 Units

1,134 Units

$1,615

Record Absorption of DC Metro Multi-Family Continues in First Quarter 2015

DC METRO MULTI-FAMILY

Economic Indicators 1Q 2015

1Q 2014

3.141 M

3.095 M

4.7%

5.5%

6.074M

6.019 M

MF Permits Issued

1,899

3,832

MF Starts

2,690

2,834

Average Home Sale Price

$585,440

$559,431

Average Days On Market

43

47

Employment Unemployment Rate Population

Average Rate (30 Year FRM)

3.77%

4.34%

10 Year Treasury Yield

1.97%

2.76%

Freddie Mac, U.S. Department of the Treasury

7% 6%

12,000

5%

10,000

4%

8,000

3%

6,000

2%

4,000

1%

2,000 0

Vacancy Rate

Units (Thousands)

Absorption, Completions & Vacancy 14,000

2008

2009

2010

New Deliveries

2011

2012

2013

Net Absorption

2014 1Q 2015

A historically large amount of supply has come on line over the last 18 months and vacancy has fluctuated during that timeframe. But with healthy demand, overall vacancy decreased from the previous quarter by 1.1 percentage points falling to 4.8% by the end of the first quarter of 2015. Average asking rates are $7.00 above their first quarter 2014-average at $1,615 per unit. While new Class A deliveries coming to market have driven average asking rents steadily upward for the past two years, the onslaught of new product will intensify competition and may cause rents to flatten out or even decrease slightly later this year.

Concessions have continued to increase as the spread between asking rents and effective rents rose to $21.00. In some new projects concessions are rumored to be approaching three months free rent–a staggering share of what would be a typical renter’s annual gross income.

1,134 units delivered in the DC metro region during the first quarter. After adding 4,079 units in 2014, Northern Virginia added another 711 units during the first quarter, leading all other jurisdictions in completions. The District accounted for 371 completions and Suburban Maryland accounted for the remaining 52 completions. The DC metro currently has 20,834 units under construction. There are concerns about overbuilding but with home ownership across the region declining and 15.7% of the population in the prime renter demographic cohort–25 to 34 years old –the DC metro region is well- positioned to absorb the large amount of supply coming on line.

Source: BLS, U.S. Census Bureau, Moody’s Analytics, MRIS,

16,000

After posting a record level of multi-family absorption in 2014, the Washington, D.C. metropolitan region (DC Metro) continued to perform well in the first quarter of 2015 recording absorption of 2,302 units. All three jurisdictions—the District of Columbia, Northern Virginia, and Suburban Maryland—registered positive absorption and only five individual submarkets returned units during the quarter. Contrary to recent trends, the two suburban markets captured more demand than the District. Northern Virginia led the region with 1,025 units absorbed. New product remained in high demand as the two submarkets that produced the highest absorption totals in Northern Virginia –Reston/Herndon and Old Town/ Virginia Highlands–saw deliveries. But it was Suburban Maryland’s Southern Prince George’s County that absorbed the largest number of units during the first quarter of the year. The submarket that returned four units to the market during the previous year absorbed a massive 410 units. Although it trailed its suburban neighbors, the District also posted strong demand, absorbing 379 units. Helping drive that demand was the increasingly popular Columbia Heights/Logan Circle/Shaw area which saw 157 units taken off the market.

0%

Vacancy Rate

Sales activity was robust during the first quarter of 2015 with 31 properties trading for a total of $1.4 billion. The District led the region with $673.4 million in transaction volume. The District was also home to the largest transaction of the quarter: the 541-unit Trilogy NoMa apartments in NoMa traded to a joint venture between CBRE Global Investors and The JBG Companies for $210 million or $388,170 per unit. Northern Virginia was second in total sales volume with $673. 4 million from nine transactions and Suburban Maryland trailed both with $288 million also from nine transactions.

Source: DTZ Research, CoStar

Outlook

Asking Rents $1,900

•

Traditionally the region has supplied between 6,000 and 8,000 multi-family units per year. However, George Mason University’s Center for Regional Analysis suggests that in light of a sharp drop in the supply of single-family units delivering to the market and the growing percentage of renters to total occupancy in the region, upwards of 12,000 multifamily units will be required annually moving forward.

•

The first quarter of 2015 saw a foreign buyer take down a large multi-family transaction in the District. Foreign groups have largely remained on the sidelines in the DC Metro multi-family market, but it is apparent that these groups are becoming increasingly comfortable with this asset class.

•

Both asking and effective rents have continued to increase at an average rate of between 1% and 2% per year. While the influx of supply may slow this increase temporarily, rental growth is expected to remain strong in the region’s transit-oriented, mixed-use developments.

$1,800

Per Unit

$1,700 $1,600 $1,500 $1,400 $1,300 $1,200

2008

2009

2010 DC

2011 NoVA

Source: DTZ Research, CoStar

2012

2013

2014

Q1 2015

Suburban MD

www.dtz.com | 1

14 • www.sokolmediaonline.com

DTZ Multi-Family Market Snapshot DC Metro • First Quarter • 2015 INVENTORY*

VACANCY RATE

QUARTERLY NET ABSORPTION

YTD NET

AVERAGE

AVERAGE

ABSORPTION

ASKING RENT

EFFECTIVE RENT

Anacostia/ Southeast

21,570

4.8%

(11)

(11)

$1,065

$1,056

Brightwood/ Fort Totten/ Lower Northeast

17,968

6.8%

33

33

$1,374

$1,354

-

1,441

Capitol Hill/ H Street/ NoMa

9,425

10.4%

16

16

$2,048

$2,047

106

1,948

Columbia Heights/ Logan Circle/ Shaw

25,484

5.2%

157

157

$1,832

$1,804

120

766

Connecticut Ave/ Georgetown/ Wisconsin Ave

22,223

6.1%

93

93

$2,001

$1,978

145

675

Downtown/ Penn Quarter/ Chinatown

6,299

3.9%

(4)

(4)

$2,414

$2,384

-

-

Dupont Circle/ Kalorama/ Adams Morgan

10,927

6.4%

(2)

(2)

$2,012

$1,976

-

230

SUBMARKET

UNDER

COMPLETIONS

CONSTRUCTION

-

133

Foggy Bottom/ GWU West End

9,049

5.7%

33

33

$2,512

$1,976

-

164

Southwest- Navy Yard

1,082

4.8%

64

64

$1,920

$1,911

-

2,480

DISTRICT OF COLUMBIA TOTALS

124,027

5.9%

379

379

$1,719

$1,700

371

7,837

Crystal City/ Pentagon City

13,429

3.9%

96

96

$2,045

$1,988

-

915

+XQWLQJWRQ )UDQFRQLD 6SULQJ¿HOG

18,849

4.0%

26

26

$1,511

$1,505

-

360

Landmark

18,696

3.6%

42

42

$1,505

$1,459

-

331

Old Town/ Virginia Highlands

12,195

11.5%

175

175

$1,842

$1,777

270

1,988

Reston/ Herndon

15,495

5.5%

379

379

$1,736

$1,718

358

448

Rosslyn Ballston Corridor

26,463

7.2%

218

218

$2,142

$2,099

-

1,035

South Arlington/ Columbia Pike

12,809

3.5%

7

7

$1,590

$1,576

83

-

Tysons Corner

9,015

7.7%

82

82

$1,869

$1,847

-

2,044 7,121

NORTHERN VIRGINIA TOTALS

126,951

6.2%

1,025

1,025

$1,779

$1,753

711

Bethesda/ Chevy Chase

10,659

5.6%

(27)

(27)

$2,179

$2,155

-

739

Gaithersburg/ Germantown

21,770

5.0%

17

17

$1,465

$1,452

-

1,722

Northern Prince George's County

53,982

3.9%

(53)

(53)

$1,372

$1,356

-

1,082 1,245

Rockville

15,528

3.7%

160

160

$1,752

$1,703

-

Silver Spring

31,434

5.1%

121

121

$1,564

$1,545

52

149

Southern Prince George's County

43,123

3.2%

410

410

$1,248

$1,232

-

939

SUBURBAN MARYLAND TOTALS

176,496

4.2%

628

628

$1,453

$1,438

52

5,876

DC METRO TOTALS

427,474

4.8%

2,032

2,032

$1,615

$1,594

1,134

20,834

Sources: DTZ Research, CoStar *All figures are multi-family units, except vacancy rate and rental rates.

Key Sales Transactions 1Q 2015 PROPERTY

UNITS SELLER /BUYER

PRICE

PRICE/UNIT

Trilogy NoMa- 151 Q Street, NE, Washington, DC

541

Mill Creek Resi JV Berkshire Property Advisors / CBRE Global Investors JV JBG

$210,000,000

$338,170

The Avenue- 2221 Eye Street, NW, Washington, DC

335

Boston Properties / WAFRA

$196,000,000

$585,075

Gramercy at Metropolitan Park- 550 14th Street, S, Washington, DC

399

Clarion Partners / Ralph Dweck

$190,000,000

$476,190

Aventine Silver Spring- 13615 Colgate Way, Silver Spring, MD

432

Blackstone / Investcorp

$85,000,000

$196,759

Sky House West- 1151 4th Street, SW, Washington, DC

264

Urban Atlantic JV JBG / Bernstein Companies

$80,000,000

$303,030

Meridian at Bowie- 3631 Elder Oaks Boulevard, Bowie, MD

348

%URRN¿HOG )ULHGNLQ 5HDOW\ *URXS

$71,750,000

$206,178

Sources: DTZ Research, Real Capital Analytics, CoStar

About DTZ DTZ is a global leader in commercial real estate services providing occupiers, tenants and investors around the world with a full spectrum of property solutions. The company’s core capabilities include agency leasing, tenant representation, corporate and global occupier services, property management, facilities management, facilities services, capital markets, investment and asset management, valuation, research, consulting, and project and development management. DTZ provides property management for 1.9 billion square feet, or 171 million square meters, and facilities management for 1.3 billion square feet, or 124 million square meters. The company completed $63 billion in transaction volume globally in 2014 on behalf of institutional, corporate, government and private clients. Headquartered in Chicago, DTZ has more than 28,000 employees who operate across more than 260 offices in 50 countries and represent the company’s culture of excellence, client advocacy, integrity and collaboration. For further information, visit: www.dtz.com or follow us on Twitter @DTZ.

CJ Hardy Research Analyst Tel: +1 202 266 1179 Fax: +1 202 223 2989 Email: cj.hardy@dtz.com

Nathan Edwards Vice President, Research Tel: +1 202 266 1189 Fax: +1 202 223 2989 Email: nathan.edwards@dtz.com 2101 L Street, NW Suite 700 Washington, DC 20037

The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

Copyright © 2015 DTZ. All rights reserved.

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www.sokolmediaonline.com • 15

Calendar of Events

August–November 2015 AUGUST

OCTOBER

August 6th

October 5th–9th

11:00 a.m.. – 12:00 p.m.

ULI Institute for Sustainability Building for Resilience: Strategies to Prepare for Extreme Events Complimentary Members-only Webinar Visit http://uli.org/research/centers-initiatives/center-sustainability/

2015 Fall Meeting Moscone Center, San Francisco, CA About Connect with the world of real estate at the 2015 ULI Fall Meeting, to be held October 5–8 at the Moscone Center in San Francisco. Join your peers for candid discussions with thought leaders on the most important topics and trends in real estate. Get boardlevel strategies for your business. Engage in candid conversations with peers. Build valuable professional relationships with partners and clients. Find out how to capitalize on new trends. Take behindthe-scenes tours in a dynamic city.

For further information, visit http://fall.uli.org/

August 11th 1:30 – 3:30 p.m.

Urban Land Institute Pro forma Modeling with Excel: Construction Draws and Rent Roll Live Online David Mulvihill, Vice President, Professional Development Contact phone: 202-624-7122 Email: dmulvihill@uli.org

August 13th 7:30 a.m.

The DC Mid-Year Multi-Family Update The Mayflower Hotel 1127 Connecticut Avenue, NW Washington, DC 20036

August 21st CREW DC Lunch-arounds are back!

Visit www.crewdc.org for further information

SEPTEMBER September 30th 11:00 a.m. – 12:00 p.m.

ULI Real Estate Consensus Forecast, Fall 2015 Complimentary Members-only Webinar Organizer: Center for Capital Markets and Real Estate Website: http://uli.org/research/centers-initiatives/center-for-capital-markets/

October 15th Save the date for CREW DC’s Annual Awards Celebration!

Visit www.crewdc.org for further information

NOVEMBER Nov. 18th–20th Greenbuild Conference and Expo Greenbuild is the world’s largest conference and expo dedicated to green building. The green building community gathers to share ideals and mutual passion at Greenbuild, sparking a contagious buzz throughout the week.

Expo Hours 10:00 am - 6:00 pm | Wednesday, November 18, 2015 10:00 am - 6:00 pm | Thursday, November 19, 2015 Expo Only Hours - 10:00 am - 1:30 am Conference Hours 1:30 pm - 2:30 pm / 3:00 pm - 4:00 pm | Wednesday, November 18, 2015 1:30 pm - 2:30 pm / 3:00 pm - 4:00 pm / 4:30 pm - 5:30 pm | Thursday, November 19, 2015 8:00 am - 9:00 am / 9:30 am - 10:30 am | Friday, November 20, 2015 Plenaries Opening Plenary 8:00 am - 10:00 am | Wednesday, November 18, 2015 Closing Plenary 11:00 am - 1:00 pm | Friday, November 20, 2015 Location Washington Convention Center 801 Mt. Vernon Pl NW Washington, D.C. 20001

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Sincere congratulations to Ralph DiRuggiero & Paramount Group for their leadership role in helping to save future generations with a more stable and eco eco--friendly environment.

We are proud to be your outside professional.

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