op_height master plan economic feasibility study_pes_07 24 2013

7/27/2019 OP_Height Master Plan Economic Feasibility Study_PES_07 24 2013

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Economic Feasibility AnalysisPartners for Economic SolutionsStructura, Inc.James G. Davis Construction Corp.

July 24, 2013



Study OverviewTest development feasibility (new & expansion)

Office & residential

130’, 160’, 200’ and 250’ heights (new construction)

Pro forma analysis for 15 illustrative submarketsthroughout DC

High density designation on Comp Plan Future Land Use map

Transit adjacentDevelopment opportunities

Potential economic impacts for the District



New Office Construction Costs130 Feet 160 Feet 200 Feet 250 Feet

Sitework (based on building sq. ft.) $10 $8 $6 $5

Three-Level Below-Grade Garage $32 $30 $24 $20

Office Building $140 $150 $160 $160

Total Cost $182 $188 $190 $185Note: Costs exclude tenant improvements.

130 Feet 160 Feet 200 Feet 250 Feet

Sitework (based on building sq. ft.) $12 $10 $8 $6

Three-Level Below-Grade Garage $32 $30 $24 $20

Residential Building $155 $165 $175 $175

Total Cost $199 $205 $207 $201

New Apartment Construction Costs



Office Vertical Expansion Costs (2-4 floors)

130 Feet -2 Stories

160 Feet -4 Stories

Sitework (based on building sq. ft.) $6 $4Below-Grade StructuralImprovements $9 $15

Building $135 $140Total Cost $150 $159



Development Decision Tree—

New Construction

VacantSite

LocationDemand

RentSite Size

Soils, Water Absorption

RentParking Need

Community

Build New

130’

160’

200’

250’

No Build



Development Decision Tree —Existing Building

ExistingBuilding

LocationDemand, Rent

Occupancy

ConditionStructuralHistoric

FloorplateSite Size

Site Coverage

Avail. Parking Absorption

RentParking NeedCommunity

Add 1-2Floors

Add 3-4Floors

Capacity Rent

Parking NeedCommunity

Renovate

Renovate &Expand

Demolish &Rebuild

130’

160’

200’

250’



Developer/property owner would pursueredevelopment (new construction) only if:

Substantial increase in space

Higher potential rentsExpiration of major tenant leases Aging structure needing major reinvestment Anchor tenant opportunity



Constraints on New ConstructionNeed for 40% to 60% pre-leasing

Limits size and number of buildingsTenant parking preferences

Infrastructure inadequacies

Road and transit capacity constraints



Vertical ExpansionMore likely choice – addition of 2 to 3 floorsExisting buildings of 8 or more floors

Less expensive than redevelopmentDoes not require demolition of valuable asset Areas of high demand with appropriate buildings

CBD & CBD FringeHigh-demand Metro station areas



Higher-Rise Office Locations



Higher-Rise Apartment Locations



Total Office ImpactImprove District’s ability to compete

Preferred locations

Lower construction costs and rentsMore competitive design – high ceilings, more windows, views Attract more knowledge workersSupport more retail amenities

Raise capture rate of new office space 1% to 2%0.9 to 1.8 million square feet over 20 years



Total Apartment ImpactImprove District’s ability to compete

Metro-accessible locations

Better product – views, high ceilings, more windowsMore neighborhood amenitiesLower rents – minimal impact

4,400 to 7,900 additional units10 to 18 percent of 2020-2040 growth



RiskProperty values

Investor confidence

Greater volatility Oversupply could lead to lower rents

Depends on the Floor Area Ratio

Unrealistic value expectations may impedeassemblages



Potential BenefitsBetter compete for regional developmentGreater design flexibility

Lower construction costs from steel and lessexpensive HVAC systemsHigher transit/biking/walking mode shareReverse commuting opportunities



Potential ApproachesMuch smaller increase in FAR than in height

Auction incremental FAR every 1-2 years

Capture increment value for infrastructure and/oraffordable housing

To not flood the market with additionaldevelopment potential

op_height master plan economic feasibility study_pes_07 24 2013

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