Why you should be bracing now for the potential HQ2 effect on the region's office market
By Daniel J. Sernovitz – Staff Reporter, Washington Business Journal, Mar 12, 2018, 12:10pm EDT Updated Mar 12, 2018, 1:40pm
Those office tenants rooting for Amazon.com Inc. to pick their hometown for its second headquarters should probably brace themselves now for the potential displacement that could come as a result.
With the prospect of Amazon taking up to 8 million square feet over time for HQ2, landlords within the fallout zone may suddenly become less interested in converting a 1,500-square-foot letter of intent into a firm lease, or in retaining an existing, 2,500-square-foot tenant, than in the prospect of Amazon taking all of their building at once.
Eric West, founding principal of D.C.-based West, Lane & Schlager Realty Advisors, calls it "the Amazon morning-after effect." The basic premise is that even a tenant-friendly market with high vacancy rates like Crystal City could suddenly become one of the tightest office markets in Greater Washington when you add HQ2 into the mix. And so, companies now leasing there might have a harder time locking in a long-term lease after Amazon (NASDAQ: AMZN) announces its pick than before it does.
"You’re taking a risk, you’re absolutely taking a risk, because I think there’s going to be the morning-after effect," West said. "The morning after, if you’re negotiating an LOI, that LOI would no longer be valid. The landlord would pull it."