GSA now has a plan to lease all of the remaining 358,000 square feet of space at Constitution Center and distribute it among the Federal Trade Commission (FTC), National Endowment for the Arts (NEA) and National Endowment for the Humanities (NEH), according to an article published yesterday (Tuesday, October 9) by Washington Business Journal reporter Daniel Sernovitz. NEA and NEH will relocate from the Old Post Office Building, which will be redeveloped as a hotel by the Trump Organization; an NEA spokesperson told Sernovitz that her agency plans to move its 150 employees to Constitution Center in early 2014. The FTC will relocate employees from leased space at 601 New Jersey Ave., N.W., and 1800 M St., N.W., while maintaining its headquarters in the historic Apex Building at 601 Pennsylvania Ave., NW., as GSA Acting Administrator Dan Tangherlini had recommended in June.
The lease deal would fill the 1.4 million-square-foot building two years after the Securities and Exchange Commission (SEC) committed to leasing 900,000 square feet, then said it did not need the space, a move that resulted in the agency’s losing its independent leasing authority. The lease also would improve the recently renovated building’s value significantly, as owner David Nassif Associates apparently continues to negotiate its sale for a purchase price estimated to be at least $750 million.
For the government landlord community at large, the removal of this “rogue” block of space should be a welcome relief. Any property owner with a large lease rolling had to be nervous that GSA would relocate their tenant in order to backfill the SEC lease. The selection NEH, NEA and FTC to backfill is about as good a scenario as one could expect. Shifting NEA and NEH into the property won’t impact the leased inventory since those agencies are vacating government owned space. The portion of the FTC move from 1800 M Street will have little impact as well since that building is undergoing a renovation and any vacant space is unlikely to be cost-competitive for future GSA transactions. The 601 New Jersey block can compete for new government tenancies but it is unlikely to prevail in a price battle against most landlords seeking to renew their government tenants.