The Food and Drug Administration won increased funding to allow it to complete construction of a laboratory complex at its White Oak headquarters campus, but its other consolidation plans remain on hold under the latest stopgap federal spending plan.
The continuing resolution President Barack Obama signed Tuesday boosted the authorization for the FDA’s Silver Spring expansion by $21.3 million to $61.7 million for fiscal 2013, which ends Sept. 30. The money will allow the agency to complete ongoing construction and equip its Life Sciences-Biodefense Laboratory complex, which is scheduled to open in fiscal 2014.
Ultimately, the FDA plans to relocate 3,393 employees to the 130-acre White Oak campus, bringing the total to 8,889. But Congress left unfunded FDA plans for communications and distribution buildings and a parking garage.
In the long run, the 10-year sequestration plan — which would impose $1.2 trillion of cuts to the growth federal spending — could cause lots of headaches for Maryland landlords. In 2014, the state faces a 1.8 percent cut in total payrolls, second worst in the nation after the District of Columbia, according to a report by broker CBRE.
Jeffrey Kottmeier, CBRE’s director of research, said tenants in the metropolitan Washington, D.C., area should take advantage of favorable market conditions. Because of high vacancy rates, tenants might be able to renegotiate leases or acquire more efficient, better-located space.
Broker Colliers International predicts a mixed result from the sequestration because the GSA is largely immune to direct cuts because its leasing program is sustained by federal agency payment to the Federal Buildings Fund. So short-term, private landlords are ensured continued payment under existing leasing agreements.
But Collier’s Kurt Stout warns about the long-term effect, as agencies absorb staffing cuts and don’t need the same amount of space the GSA has leased for them.
He wrote, “If there is peril in GSA’s occupancy agreement structure it is that most of these agreements allow the tenant agencies to give their space back to GSA with just 120 days notice — this despite the remaining term on the lease. That won’t impact property owners directly because GSA must continue to pay rent, but it could create vacancies within the GSA’s inventory that the government will seek to backfill. If the Sequester lingers we can expect that these backfill spaces to develop a growing gravitational force, pulling tenancy out of other buildings as leases roll.”
He said the trend toward GSA downsizing already is under way without the sequestration, thanks to the practice of freezing funding under annual continuing resolutions and the Obama administration’s directive to freeze the federal real estate footprint.
Dan Tangherlini, the GSA’s acting administrator, warned lawmakers during a House hearing last week that continued budget cutting could cost more money in the long run.
He said the agency is working on a budget baseline dating to 2010, the last time Congress passed an appropriation bill, which has forced federal property managers to defer repairs and renovations.
“Business benchmarks in real estate say invest 2-to-4 percent of fair market value for repairs,” Tangherlini said. “One dollar of maintenance and repair obviates the need of four to five dollars of capital investment. Boilers stop working. Roofs that fail. This is what it’s like on a very grand scale to be a homeowner.”
Already, an effective freeze in new construction has forced a halt in plans to consolidate the massive Department of Homeland Security headquarters and could get in the way of the FBI moving to Greenbelt or another new home.
Even so, the FDA fared better than most agencies as Congress avoided a federal shutdown by passing a spending bill that locks in $85 billion in government-wide sequestration budget cuts this year. The increase for White Oak marks a sharp turnaround since the continuing resolution passed for fiscal year 2011, which provided no designated funding for headquarters construction. The FDA ultimately won $44 million that year, when the General Services Administration responded to appeals by Maryland lawmakers and dedicated more than half its $82 million building budget to White Oak.
When completed, the campus will include more than 1 million square feet of usable office space under a decade-old consolidation program that has moved workers from Rockville and Bethesda.
The FDA’s budget death-defying act is just the latest case of how Maryland has lucked out as Congress still manages to set some priorities even as it has created a series of federal financing crises since Obama took office in 2009.
In Urbana, construction continues on the $192 million Social Security Administration’s National Support Center, which helped increase office construction nationwide by 14 percent in February from January, according to McGraw-Hill Construction’s monthly report.
Arlington-based AvalonBay announced it sold a 564-unit apartment property in Rockville for $135 million to an undisclosed buyer.
The 551,000-square-foot garden-style complex was completed in 1995 at 9901 Gable Ridge Terrace. It was 91.5 percent occupied at the end of 2012, according a filing with the Securities and Exchange Commission.
AvalonBay recorded the cost of the property, after $21.9 million in total depreciation, at $48.4 million.
Montgomery County planning staff recommended approval of the site plan for Bethesda Center, an office, hotel and retail complex fronting Wisconsin Avenue.
The project includes 253,787 square feet of office space, a 12-story, 196,357-square-foot Westin hotel, 16,326 square feet of restaurant and retail and a 576-space underground parking garage on 2.1 acres in the Woodmont Triangle.
The Planning Board will consider the proposal by the Bernstein Cos., based in Washington, D.C., at its April 4 hearing.
The complex would raise the skyline of the block between Woodmont and Wisconsin avenues just south of Norfolk Avenue. The project, which won preliminary plan approval in 2011, would replace the Bethesda Court Hotel at 7740 Wisconsin Ave., Tako Grill and the Connor Building, a two-story office and retail center.
The plan has been revised to address concerns about obstructing light, air and views for the neighboring Bethesda Place building. The project steps down in height, consistent with surrounding properties and approved plans, according to the staff report.
“The height and massing does not adversely affect the surrounding properties in a manner inconsistent with urban environments,” the report said.
Bernstein’s preliminary plan amendment also proposes to increase the number of hotel rooms by 19 for a total of 222 rooms and reallocate 2,885 square feet of office use to restaurant/retail and hotel use.
The plan by Potomac-based Willco Cos. to build a 292-unit apartment building on the site of a surface parking lot in downtown Silver Spring goes before the Montgomery County Planning board April 4 with staff recommendation for approval.
The proposal scraps a plan approved in 2009 that would have added a 191,281-square-foot office building to the northern end of the Georgia Avenue corridor. Instead, the developer proposed a 161-foot-tall multi-family property that includes 261,737-square-feet of residential uses and 1,619 square feet of retail use.
Willco proposes to build 240 market rate units, 35 moderately priced dwelling units and 17 workforce housing units on the 0.69-acre site.
The plan ends hopes of restoring office space to the property at 8621 Georgia Ave., which served for 34 years as the first home of the Johns Hopkins University Applied Physics Laboratory before it moved to Howard County in 1976.
Willco is not alone in dropping plans for office space in downtown Silver Spring in favor of apartments. The property sits 75 feet north of Colesville Road, next to land owned by Lee Development Group, which is waiting for demand to perk up for an office building that was approved in 2008 next to the Fillmore music hall.
Guardian Realty Investors of Bethesda also dropped plans for a 13-story office building one block north of the Willco property on another surface parking lot at 8711 Georgia Ave. Construction has started on a 160-unit apartment building.