Office Market Assessment: Montgomery County, Maryland, by Partners for Economic Solutions, June 18, 2015

Below we offer the subject study in its entirety.    Although the report was prepared for the Montgomery County Planning Department, its lessons are equally valid for Fairfax County (which has the highest level of office market vacancies in the region).  Every major point made in this report is consistent with what Reston 20/20 has told the Reston Master Plan Task Force, the County's Department of Planning & Zoning, and the Board of Supervisors (including specifically Chairman Bulova) since September 2011 when we commented on the then peculiar seeming case of Accenture leaving Reston for Ballston.

Here are the report's key findings and a few comments on them.

Findings

• Most jobs created during the economic recovery have been in restaurants, retailers and health care facilities, rather than in office-based sectors such as professional and technical services.

This is consistent with a recent report from GMU's Center for Regional Analysis.  It not only makes the same point, but adds the corollary that a key result has been a lowering of Gross Regional Product as a result of the lower incomes earned in these newer jobs.

• Telecommuting, technological advances, more efficient work spaces and practices such as hoteling have enabled office tenants to reduce their square footage even as they expand their workforce.

This is a point Reston 20/20 has made repeatedly, including four letters to the Board of Supervisors Chairman (here, here, here, and here) to no discernible effect.  The County continues to insist on planning for 300 GSF per employee, an amount that could see twice as many employees in a building as are expected, including all the ramifications of that growth.  

• The most successful office clusters in Montgomery County are part of mixed-use developments with a strong sense of place and a quality environment. Transit connectivity is increasingly important to office tenants. This trend is consistent with recommended land use strategies in recent County plans for White Flint, Bethesda, White Oak and other communities.

Reston and Tysons have the advantage of the arrival of the Silver Line as a focal point for mixed-use development, but in both cases the balance in square footage strongly favors office space increases--at the 300 GSF per office worker level discussed above.  Moreover, the "quality" of these areas is seriously undermined by the absence of concrete goals for open space and the County Park Authority's refusal to adhere to its own "Urban Parks Guidelines" in the development of these areas.  The result could easily be crammed office, residential, and retail development that is unattractive to employers, employees, residents, and shoppers. 

• Single-use office developments without convenient transit or highway access are having difficulty in attracting tenants.

Reston is blessed that its existing single-use office development is almost exclusively located in the former Reston Center for Industry and Government (RCIG) that, except for the far east end, is within conventional transit-oriented development distance of a 1/2 mile of Reston's three Metrorail stations.  This fact could mean that these office spaces will remain well occupied and, therefore, have less near-term motivation for redevelopment, especially in the slower office market development climate discussed below.  

• Future office development is likely to occur at a much slower pace and be concentrated in prime locations. Not every location will be able to attract new office development or maintain former occupancy levels.

One consideration we believe that PES may have overlooked is the prospect of long-term federal austerity, meaning fewer employees and contracts in the metropolitan area for some time as reflected in several Reston 20/20 postings.  It appears to be a concern also shared by GMU CRA in its thinking about regional employment.  This goes beyond GSA's deliberate efforts to shrink office space per worker, do more work in government office buildings, etc.  It is basically an extension of the sequestration mentality of the last few years (not to mention the occasional Congressional budgetary dysfunction resulting in total government shutdowns). 

We encourage readers to review the entire PES report below:

   Montgomery County office market