Hyperbole on the redevelopment of the FBI building site on Pennsylvania Avenue NW
Yes the FBI building is really gross and takes up two city blocks. No, two city blocks even on Pennsylvania Avenue, aren't worth more than four city blocks at the City Center site (between H and New York Avenue and 9th and 11th Streets NW) because four city blocks provide more development opportunity and more economic value.
See "GSA proposes trading Hoover Building for new FBI campus" from the Washington Post. From the article:
In a solicitation to real estate developers Monday, GSA Acting Administrator Dan Tangherlini proposed swapping the Hoover building site — a valuable property on Pennsylvania Avenue — for the construction of a new, consolidated campus located in the Washington region. The solicitation, posted online here , asks for responses by March 4.
I don't think that's realistic.
While this calculation isn't exactly right (I need to read a textbook on real estate valuation) it would work out to be something like this:
1. A city block has about 60,000 square feet, although every square inch isn't developable.
2. Two city blocks is about 120,000 square feet.
3. At a 10.0 Floor to Area Ratio is not unreasonable, based on the various bonuses available in the Downtown Development Overlay Zone.
4. Say a range of 90,000 square feet of developable space X 10 = 900,000 square feet to 100,000 s.f. X 10 = one million square feet of development. Although the site is developed to almost 3 times that according to the GSA website, which must be close to 100% lot coverage.
5. At a value of $70/s.f. of developable space, the FBI land is worth from $63 to $70 million. (Or triple that if the site would retain the current development footprint, which is doubtful.)
6. The building needs full rehab and the cost is prohibitive so it would be torn down, meaning the building has negative value and would be subtracted from the sales price.
7. The new FBI campus would ideally house 11,000 workers. If each takes up 250 s.f. (which is the rule of thumb, although this is decreasing through telework and "hoteling") that's not quite 700,000 s.f. of new space required, although they should also include room for growth. But that's 1/4 of the space claimed to exist in the current building for fewer workers, so they could have significantly greater demands.
8. The cost of constructing new office space for the FBI would be around $130 to $150/s.f. according to Reed Construction Data. So the cost of the construction would be about $91 million minimum for 700,000 s.f., plus the cost of the land. If they need 4X the amount of space, as they have currently, then costs for construction would quadruple.
In any case, the land can't be worth as much as the Washington Post and the GSA believe.
Note that this has come up with the General Printing Office too. There they have a great historic building, but expensive to renovate. The cost of renovation and building a new site is greater than the value of the current site, which makes change any time soon unlikely.
The same might be the case for the FBI site.
Labels: commercial real estate market, real estate development
posted by Richard Layman @ 11:03 AM&Permanent Link
9 Comments:
Richard, a quick ballpark calculation via Bing maps shows a site area of ~260,000 sf. So, more than twice what you estimate.
I see how this might benefit DC proerty taxes -- but not the feds.
Losing that many transit worker won't be good either. Tough with the FBI b/c of police cars etc but I'd have to guess transit mode is far higher for goverment buildings than private ones.
There are really days I think the suburban counties would welcome 100% of agencies still based in DC. Just leave EOP and congress....
Richard thanks for addressing this problem. It has gotten out of control and more and more agencies are now poised to leave the city. Neither Obama or EH Norton seem to be doing anything at all to stem this hemmoraging of jobs and heritage. We are losing out to slimy suburbs that are pillaging and raping the city since we have no legislative control and they can take what they want. Has a study ever been done that lists or quantifies the jobs lost from DC over the years?
SOme Fed. buildings have as much as 80% or more transit use.
2. Alex B. Thanks. You're a lot better with Bing than me.
260000*8*70 = a lot, almost $146 million. But if they need 3 million s.f. on the other end or even less, I am confident that the construction cost is greater than that. Plus the cost of land.
3. I do think we'd be better off, on PA Ave. with nonfederal buildings, because they are dead at night and have big security requirements which tend to be anti-urban.
They could be accommodated at St. Es I suppose.
Richard,
Not sure where you're getting those office values, either. Perhaps you are looking at office rent per sf rather than office building sales per sf?
The Market Square buildings right next to the FBI building sold in 2010 for over $900 per sf. Now, the average sale price is lower, of course - but still, it's hundreds of dollars per sf.
http://www.bizjournals.com/washington/print-edition/2011/06/17/for-sale-landlords-flood-market-with.html?page=all
This may be urban legend, but I had heard years ago there are some geographic/geologic issues with the DC FBI site that will have an effect on any new construction or renovation.
Rumor has it that the current building is located on the old mouth of Tiber Creek which was an open sewer and quite broad when it was filled in at the turn of the 20th-Century. Hence the need to replace the sidewalks every 5-10 years, especially when there's a lot of precipitation for a few years in a row.
I'd like to look at a contour map of the area--having been through the area numerous times in various ways, my guess is that the steep change in north-south elevation of the site is not a plus.
Alex, if you talk to a developer, they say the going rate for land to be developed is about $70/buildable square foot. So I am valuing the land as $700/s.f. Your price makes sense when you add the cost of construction. That's a separate price, which I used a general number from the Reed Construction data set.
Note that the $70 figure might be a little high or low, and probably varies somewhat. Trophy locations might garner a higher price. WRT the figure I use, it came from a developer heavily active in DC, but we were talking about NoMA.
Note that I will concede that your colleagues will have better communications systems with developers than me and might have different figures.
Ok, I see what you're saying.
A few things:
- The buildable area is larger even than 260,000 sf - the GSA solicitation put it more in the 290 range. That's comparable to the first phase of the City Center project now under construction.
- The current building has 2.1 million SF. Assume your 70/buildable sf, building something of the same size on that lot would still give you a land price of double what you estimate.
- Just because they're interested in a land swap doesn't mean that one party can't sweeten the deal. GSA could agree to demo the building (as DC did with the old Convention Center). If GSA is looking to build a new FBI HQ on land they already own (e.g. Franconia Springfield warehouses) that sweetens the deal even more.
yep. that's preordained because as you pointed out my estimate of lot size was way off. But the general point is true even so. Still, sweetener is another word for not getting a new complex for free in return for the current site.
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