Recap of Rockville Chamber of Commerce Real Estate Panel Discussion
Join TCA for our next virtual community meeting, October 18th at 7 PM. Representatives from Saul Centers will brief us on the status of the Twinbrook Quarter project, including a projection for when Wegmans will open. Sign up here to register for the meeting.
Rockville Chamber of Commerce and Rockville Economic Development Inc. (REDI) co-sponsored a real estate panel discussion on October 6, 2022 at the Cambria Hotel in Town Center. About twenty attendees heard from a panel of three real estate professionals, including Todd Pearson, President of Saul Centers, builder of Twinbrook Quarter.
Panelists gave an overview of the office, retail, and residential markets in greater Rockville. The office market is struggling with occupancy rates at well below pre-pandemic levels. The shift to telework is having an effect as large office tenants look to shrink their footprint or step down from Class A to Class B space to save money. Fortunately for Rockville, the life sciences industry is an exception to this trend. Unlike other knowledge workers, those in life sciences often need specialized laboratories and equipment, meaning they must perform work onsite. Montgomery County continues to have success attracting businesses in the life sciences area, including near Twinbrook. Having a critical mass of well-qualified workers in the region is a key factor to this success.
Strong education and income demographics in Rockville point to a brighter picture for the retail and residential markets. Saul is very optimistic about Twinbrook Quarter given the visibility of its retail spaces on Rockville Pike and the residential density nearby to support them. In addition to Wegmans, it hopes to attract other tenants that will meet the daily needs of residents, even if Saul must subsidize rents initially for these operators to ensure a mix of amenities that promotes the overall success of the project.
The optimism surrounding brick and mortar retail was surprising given the trend toward online shopping. While indeed many goods retailers have closed, commercial landlords have found success replacing them with so called med-tailers. This refers to businesses that operate in traditional retail storefronts, but offer medical, wellness, and even veterinary services. All those households that became new pet owners during the pandemic need veterinary and grooming services! This class also includes the urgent care facilities we see sprouting up on Rockville Pike, as well as fitness and physical therapy centers.
Town Center still poses vexing problems for the city. One panelist noted the city lost an opportunity by not having gateway frontage on Rockville Pike to draw in visitors. Contrast this with thriving Pike and Rose which is highly visible from MD-355. It was also noted that despite recent construction, Town Center still lacks the residential density to support the volume of retail in the area. This echoes a finding made by the Urban Land Institute in its 2019 analysis that Town Center needed more residents per square foot of retail space and that existing retail should be concentrated in a core rather than distributed. Panelists thought new projects should be cautious about having street-level retail and consider other uses to activate the street. However, newly consolidated ownership in Town Square (the core of Town Center) sparked some optimism. Morguard REIT, owner of the Fenestra residential apartment complexes in Town Square, recently purchahed Federal Reality’s stake in the retail portion of the development. This could help get all the stakeholders rowing in the same direction. Morguard’s representative on the panel signaled a willingness to experiment with new types of uses for retail spaces (e.g., medical offices) and to plan more cultural programming in Town Square to attract visitors.
The discussion centered mainly on the major commercial centers like Town Center and the emerging Twinbrook Quarter. Regrettably, smaller shopping centers and issues like the loss of our neighborhood pharmacy did not receive attention. However, the city is hosting two listening sessions in November to receive input on how it can support owners and tenants of neighborhood shopping centers.
Overall, the city is well-positioned to attract real estate investment. Our demographic profile appeals to investors: well-educated workforce, stable employment base, high-earning households, good access to public transportation networks, etc. Housing demand is especially strong in amenity rich areas. Interestingly, office tenants are now looking for the same amenities to entice knowledge workers back into the office. These employees demand more than a nice office building. The workplace must also be located near amenities and experiences they cannot get at home. Rockville recently lost a management consultant business located on the Pike when it decamped for downtown Silver Spring where it found “a community that combines urban energy and a hip vibe and feels like a welcoming neighborhood at the same time.” The company wanted amenities “to increase employee satisfaction with returning to hybrid in-person work and contribute to new talent acquisition.” Translation: In order to get our people to show up in the office and to attract new employees, we had to offer a top-notch location surrounded by appealing amenities. The success of Twinbrook Quarter and Town Center will depend on delivering that kind of experience to its residential and office tenants.