Watching the National Science Foundation shuffle in the starting blocks, most of the Northern Virginia real estate community has expressed certainty that, especially in this budget environment, NSF is unlikely to be moving from its present location in Ballston. The one-time costs to relocate and replicate its space will likely provide the incumbent landlord with all of the financial advantage required for GSA to justify a renewal. Further, when GSA submitted a prospectus to the Hill with a $38.00 rent cap, it put the feasibility of competing build-to-suits in doubt. It’s a tough trick for developers to finance and construct new, class A office towers at metro-proximate locations for a $38.00 flat rent.
But, perhaps the straw that broke any chance of a broad competition was set upon this procurement when the recent resolutions were approved by the House this past Thursday. The House resolution for the NSF prospectus served to reduce the maximum rent allocation from $38.00 to $36.24.**
A solid chunk of the savings touted by Congress in its recent prospectus authorizations came from the NSF annual rent budget, which was reduced from $26,220,000 to $24,200,000. Though the allowable rentable square footage was also reduced from 690,000 RSF to 667,759 RSF, the rent per square foot decreased. GSA’s policy regarding prospectus is that the approved per-square-foot figure is a hard cap – so further decreasing the size of the lease won’t allow property owners to seek a higher rent.
Net result: It will be a lot harder for developers to build at this rent. We anticipate that NSF isn’t going anywhere.
**UPDATE: When we originally published this article we speculated that the per-square-foot prospectus rent reduction was the product of misreporting the square footage in the House resolution. In fact, it was intentional. The National Science Foundation made the case that reducing its square footage at its current location would trigger immense reconfiguration costs. The House ultimately bought into this argument but nonetheless reduced the overall rent that NSF was authorized to pay. So, if NSF chose not to reduce its footprint it would have maximum authority to $36.24/RSF. If it did reduce its premises it could pay up to $38.00/RSF.