Bethesda, Md., “is not a submarket that has a lot of buildings that trade,” according to Holliday Fenoglio Fowler L.P. senior managing director Jim Maisel. So it’s certainly of note when the 17-story, 368,400-square-foot 3 Bethesda Metro Center changes hands – which it just did, having been purchased by Brookfield Office Properties, Inc., for $150.1 million. HFF marketed the building on behalf of the seller, Meridian Group.
“We marketed the property for 30 days,” Maisel told Commercial Property Executive, “and there was good interest. When properties come up [in Bethesda], you get a lot of attention.”
The Class A office building sits adjacent to the Bethesda Metrorail Station and one block from Bethesda Row, an upscale retail area. Office space is 93 percent leased to tenants including the Bureau of National Affairs, Bank of America and Merrill Lynch. The site also has capacity for future development. But with two of those tenants – the government and BoA – having recently announced cutbacks, what’s going to happen to the leasing arrangements?
“We’ve not seen a slowdown,” Maisel said. “These things take a long time – it’s like turning an aircraft carrier. People look at stats, but the reality is that it takes a long time to trickle down into specific markets. In fact, Walter Reed just relocated to Bethesda, so it will have the opposite effect,” he said, referring to the recent combining of the Walter Reed Army Medical Center with the Bethesda Naval Hospital.
An Avison Young report notes that metropolitan Washington is the healthiest market the firm monitors, with an overall vacancy rate of 11.8 percent, down 70 points from mid-year 2010. A Jones Lang LaSalle report asserts a similar outlook, noting that Bethesda has continued to demonstrate strong fundamentals, with rents equal to or exceeding pre-recession levels and holding vacancy rates among the lowest in the region.