May 28, 2020
How Bethesda’s Development Boom Could Be Impacted By The Pandemic
Jon Banister | Bisnow
Cranes have lined the Downtown Bethesda skyline in recent years as developers build a wave of new office, multifamily, hotel and retail projects. But now, with a pandemic and economic downturn, those developments will deliver into a market that looks starkly different from when they broke ground.
The region is now starting to allow businesses to reopen in a partial capacity, and Montgomery County Executive Marc Elrich announced Thursday that the first phase of reopening will begin the morning of June 1. The first phase will allow restaurants to begin outdoor seating and other nonessential retailers to begin curbside pickup.
But it could take months, or even years, after the initial reopening for the Bethesda economy to return to its previous levels.
Bethesda developers say the hospitality and retail markets are feeling significant pain and will take a long time to recover, and the under-construction apartment and office space will be slower to lease up than initially expected, but they remain bullish on the market and say it is one of the best-positioned areas in the region to recover from the crisis.
Absorbing The New Office Space
Bethesda had 1.5M SF of office space under construction as of March 31, according to Newmark Knight Frank, in addition to the 300K SF JBG Smith project that delivered 88% leased in Q4.
The new development will add to a Bethesda office market that had had 10.9M SF of inventory as of March 31, with a vacancy rate of 12.9%, according to NKF. For comparison, all of suburban Maryland had a 14.8% vacancy rate in Q1, the District had a 14.5% vacancy rate and Northern Virginia’s rate stood at 18.4%.
Carr Properties is preparing to deliver its 360K SF office building at 7272 Wisconsin Ave., branded as The Wilson, by Oct. 1, CEO Oliver Carr told Bisnow. He said the project is just under 80% leased, and has landed tenants including WTTG Fox 5 and Enviva Partners.
“Yes this is a big wave, but I think the market is starved for buildings that offer a better experience with better quality amenities and create a healthy environment with improved HVAC systems,” Carr said.
“I think coming out of the crisis we’re going to see increased funding for NIH, and that could spur more healthcare and research-related demand in Bethesda,” he added.
One developer that hopes to benefit from that demand is Stonebridge. It broke ground speculatively in May 2019 on a 370K SF office building at the corner of Wisconsin and Montgomery avenues, and it has yet to sign a tenant.