With his latest venture, Washington developer Conrad Cafritz is simply offering units for rent.
He doesn’t care what you do in them. Looking for an apartment? Great, turn the large open area into your living and dining space and the smaller room into your bedroom. Need a small office but want to rent just for a year at a time? Configure the larger area into open-office seating and the smaller room into a private office.
“This building is your home, whether you live or work here,” Cafritz said, touring the site of his $50 million prototype building, in Alexandria, a few days ago.
Born into one of Washington’s elite real estate families, Cafritz, 77, thought he had seen just about everything the industry had to offer. But then teleworking and start-up entrepreneurship — both empowered by smartphones — began to melt away distinctions between homes and offices.
He is so certain that those lines will continue to blur that he is launching a venture – starting at about $250 million – to acquire and rehab empty office buildings and turn them into units similar to New York City lofts available for rent to either residential tenants or businesses.
If it works, Cafritz plans to take advantage of sagging suburban office markets nationwide by buying and converting 50 to 100 vacant buildings. The venture is called e-lofts and is headed by Robert Seldin, a former executive at the apartment giant Archstone.
“The first thing I do when I wake up is check my email. The last thing I do when I go to sleep is check my email,” Seldin said. “So I’m home, I’m in bed, and I’m working. And you never really had that ability before.”
One can imagine some novel interactions arising. As one tenant steps out of his apartment, in his pajamas, to walk his dog, another may pass by, briefcase in hand, on the way to a meeting in the unit next door.
Seldin said that’s where the world is headed anyway. And he pointed out that each tenant will have access to a kitchen, a washer and dryer, and a full bathroom.
“When you’re living and when you’re working continue to blur,” he said. “And the idea that you need to sequester different physical spaces for those uses is somewhat anachronistic.”
The first project is a month from completion. Last year, Cafritz and Seldin bought a 12-story Alexandria high-rise off Interstate 395 — the type of building Cafritz once would have built — and chopped it into 200 units averaging 1,000 square feet outfitted with stainless-steel appliances, exposed beams and dark wood paneling.
They are adding amenities that, in a dormitory, would make a college dean blush. The 10,000-square feet of interior space will include a pet spa and three soundproof music studios for residents (or employees) who want to jam. Outside, a 30,000-square-foot courtyard will feature a beach volleyball court, outdoor movie area and table tennis. The rent? $2,400 a month.
Other companies are also combining homes and workspaces. WeLive, an offshoot of the co-working firm WeWork, offers diminutive but furnished rental apartments in two buildings, one in Lower Manhattan and another in Arlington’s Crystal City, five miles from Cafritz’s building at 4501 Ford Ave.
Cafritz has committed to self-funding the first five projects, all of which will be in the Washington area, he said. He is emboldened by an economic disconnect he hadn’t seen before in his 50-year career: a sustained period during which the Washington area is adding jobs but office buildings aren’t filling up.
In the past 12 months, the region added 22,600 office jobs, a better-than-average tally, but leasing and rents remain largely flat.
“While landlords and their agents continue to be hopeful that the market is turning in their favor, we don’t see any real indication that will be the case any time soon,” said Tom Fulcher, executive vice president at Savills Studley, in the real estate services firm’s second-quarter report.
The casualties are all around. The tallest building in the region, completed in Rosslyn nearly three years ago, has not had a single tenant. About 150 buildings in Northern Virginia have yawning vacancies of 50,000 square feet or more as employers use space more efficiently, and some major owners have sold off under-occupied suburban properties at a discount.
The first building converted by e-lofts has been vacant since 2008. It was assessed by the city at $57.4 million in 2006 and bought by e-lofts for $20 million, a 65 percent discount. Because it is in a district that allows both residential and commercial construction, no zoning change was required.
He said the hardest part is explaining to other developers how little their empty buildings are worth.
“The demand for them has changed, and the fundamental value of them has changed,” he said. “The issue is whether the owners recognize the real value.”