The grin was concealed by a white “Federal Realty” face mask, but there’s no doubt it was there as Don Wood descended the interconnecting staircase between the two floors of his company’s brand new headquarters to greet the visitor awaiting his arrival.

And as he neared, he happily proclaimed: “My god, another human being! Good to see you. This is the craziest thing.”

The CEO of Federal Realty Investment Trust (NYSE: FRT) debated internally with his executive team whether the middle of the coronavirus pandemic, while the majority of the company’s office staff continued to work remotely, was the right time to leave its former space about a mile up Rockville Pike for 909 Rose in North Bethesda. But the way he saw it, there’s just something about being around colleagues in a brand new office setting that virtual platforms like Microsoft Teams and Zoom can’t capture, and he wanted to be sure those employees had the option.

Layer onto that the fact that Federal Realty developed the 11-story, 212,000-square-foot building, where it has leased 44,000 square feet for its new home, and Wood was bursting with excitement.

“We thought of not doing it. Should we put this off and everything? But I completely underestimated what it does to morale when you do,” he said from inside Federal Realty’s spacious and mostly unoccupied main lobby. “Because, everybody was kind of happy to be home that first month or two right? We’re more productive from outside, blah, blah, blah, isn’t this wonderful. That’s one thing, which I think is the encouraging part. But the morale, the ‘we’re a team’ kind of thing, came back in spades, more than i thought it would, obviously, so I guess I’m a little more optimistic.”

Wood recently gave the Washington Business Journal an exclusive first look at 909 Rose, the latest building to deliver in its larger Pike & Rose mixed-use project, a $700 million redevelopment of the former Mid-Pike Plaza. The LEED Gold building, designed by Hickok Cole Architects, cost between $128 million and $135 million to develop, per Federal Realty’s most recent earnings statement. While designs predate Covid-19, it’s equipped to minimize the spread of the virus with features including hospital-grade air filtration, a dedicated outdoor air ventilation system, and touchless elevators able to limit the number of occupants per car to promote social distancing.

Federal Realty has leased space on floors two and three for its headquarters. It will be joined by OneDigital when the health benefits company moves into 16,245 square feet on the building’s seventh floor later this year. The advisory firm is combining workforces in Bethesda and Chevy Chase created through the merger of employee benefit firms C.T. Hellmuth and Keller Benefits.

Anmarie Gaalaas, managing principal OneDigital, said the firm was attracted by the building’s modern design, surrounding amenities, and proximity to the White Flint Metro rail station. It noted Federal Realty’s enthusiasm for the building’s mechanical equipment and air filtration system, though that seemed of lesser importance at the time than it does now.

“They were so thorough in their explanation about the design, and this was even pre-Covid, when that wasn’t even something you would think about,” she said.

The building has about 4,000 square feet of ground-floor retail, including space from which Cava’s founders plan to open a full-service Greek restaurant, and more than 600 parking spaces. Amenities include a pair of reservable conference rooms, bicycle storage, and a rooftop terrace with sweeping views looking over the solar panels and green rooftops of the other Pike & Rose buildings — and beyond toward D.C. The building also has direct dark fiber connections and Wi-Fi amenity spaces, while Pike & Rose offers wireless connectivity throughout its 24 acres, something Wood hopes will be part of the building’s broader appeal.

“The most important part about this place, to us at least, is if you lease here, you’re not covered by the four walls of the building,” Wood said. “The four walls of the building are part of your office, but so is Sunday Morning Bakehouse. So is the park that’s completely Wi-Fi enabled so you’re able to sit out there.”

Nobody knows for sure how drastically employers will change how they use office space in a post-Covid-19 world, but Wood said he believes flexibility will be a big part of it, as will indoor air quality, and he hopes that will drive leasing activity at 909 Rose and the next, 250,000-square-foot building now being designed for possible groundbreaking in mid-2021. Federal Realty has retained JLL as its office leasing agent.

Among the prospects Wood hopes to engage are companies in Bethesda, D.C. and even Northern Virginia that want smaller satellite locations for their employees to cut down on the need to make the daily commute to the main office. It is also talking with coworking space providers to provide a broader range of office options.

While many office tenants have delayed making long-term real estate decisions during the pandemic, especially in its early days, Wood believes there’s been a shift in mentality since late August when corporate real estate decision-makers resumed their search efforts.

“I think we’re hitting this at the right time,” Wood said. “Do I wish more of this building was leased up today? You bet. Conversations that we were having pre-Covid have stalled in a number of cases. That’s what happens. The conversations we’re having now are the first start of ‘Yeah, we’ve got to move beyond this.'”

By Daniel J. Sernovitz – Senior Staff Reporter, Washington Business Journal

Sep 18, 2020