The company’s future landlord pointed to a key reason for the relocation: ESG.

Sodexo, a global facilities and food services management giant, is relocating — and substantially downsizing — its U.S. headquarters from Gaithersburg to a new office building in North Bethesda.

The Paris-based company’s American arm has been located in the late-’80s-era office building at 9801 Washingtonian Blvd. since 1998. Its approximately 450 employees currently occupy nearly 117,000 square feet there, according to CoStar data.

Now the company is slated to more than halve that and move into 52,000 square feet at 915 Meeting St. — a 276,000-square-foot trophy office-over-retail building under construction as part of Federal Realty Investment Trust’s 24-acre Pike & Rose mixed-use development. The building is anticipated to deliver in the fourth quarter of 2023. Sodexo would move in spring 2024, according to Federal Realty (NYSE: FRT).

The terms of the lease weren’t disclosed. Both Sodexo and its broker, who represented it in the transaction, declined to comment.

From Federal Realty’s point of view, it’s a fairly straightforward story of the so-called ongoing “flight to quality.” That’s the popular name given to the post-Covid trend of big companies flocking to new, highly amenitized Class A construction, based partly on the assumption that nicer digs will lure employees back to the office, while Class B and C buildings struggle to find tenants as teleworking and hybrid firms, nonprofits and governments require less space.

The building at 915 Meeting St. will be gleaming and glass with such perks as a rooftop conference center, a fitness center and private terraces. It will be about a quarter-mile north of the Red Line’s North Bethesda (formerly White Flint) Metro station, and walking distance to Pike & Rose’s various retail and restaurant offerings. Sodexo’s current location sits next to the Rio Lakefront shopping and entertainment center, but about 4 miles from the nearest Metro.

The new building will feature high-grade air filtration, which tenants find attractive on the heels of the pandemic, Stuart Biel, a senior vice president with Federal, said in an interview.

He also noted that while the building itself is pursuing a LEED Gold certification, the whole development has achieved LEED for Neighborhood Development certification. That’s a rating meant to capture the environmental friendliness not only of the building, but also of its surrounding context — a “rare distinction” in the LEED world, potentially attractive as tenants become increasing conscious of environmental, social and governance (ESG) issues, Biel said.

Sodexo’s move comes a year after Choice Hotels International Inc. (NYSE: CHH) said it would take 105,000 square feet in the same building, relocating its corporate headquarters there from Rockville. In an October 2021 statement, Choice Hotels President and CEO Pat Pacious lauded the “amenity-rich” North Bethesda location, saying it would help the company “offer our associates best-in-class places to work.”

Sodexo has considered leaving Gaithersburg before. It weighed options in Montgomery County, Frederick County and Northern Virginia before ultimately deciding to stay put in 2013. Maryland, Montgomery County and the city of Gaithersburg sweetened the pot back then with $4 million in public incentives, in the form of conditional loans, not including other tax credits. At that time, Sodexo’s Gaithersburg location had on the order of 600 full-time employees.

It’s unclear whether any public incentives were involved in this latest move.

The owners of the buildings Sodexo and Choice Hotels are leaving — which appear in property records to be affiliates of California-based KBS Realty Advisors LLC and Potomac-based Foulger-Pratt LLC, respectively — could not be reached immediately for comment.

Some offices in Gaithersburg and Rockville have been in high demand by life science tenants, including for conversion to laboratory space.

By Dan Brendel – Staff Reporter, Washington Business Journal