Cloudforce finishes expansion at National Harbor, bucking tech-centricity of Northern Virginia

WASHINGTON BUSINESS JOURNAL – Cloudforce, a consultancy that specializes in Microsoft’s cloud ecosystem, is tripling its office footprint at Oxon Hill’s National Harbor, citing the area’s attractive amenities and a congested tech sector across the river in Northern Virginia.

The firm, owned by Metrolink Networks LLC, had already been located at National Harbor. Cloudforce recently expanded its footprint to 15,000 square feet there, occupying the top floor of 120 Waterfront St. and putting its name on the building.

While Prince George’s County certainly hasn’t hidden its desire to get its beak wet in the tech industry, from data centers to quantum computing, typically Northern Virginia is billed as the regional hub. Everybody’s heard about the gravitational pull of Amazon.com Inc.’s HQ2 and Virginia Tech’s innovation campus, and that big names like Microsoft Corp. (NASDAQ: MSFT), The Boeing Co. (NYSE: BA) and Raytheon Technologies Corp. (NYSE: RTX) are expanding their footprints in the area. So why is Cloudforce tripling down on National Harbor?

Northern Virginia “has become oversaturated with tech companies to the point where the benefits have been spread too thin, in my opinion,” Husein Sharaf, Cloudforce’s president and chief technology officer, wrote in an email. “Would we rather be a tiny fish in a massive pond full of hungry fish vying for the same food, or a bigger fish in a relatively untapped pond full of opportunities others have not yet seized?”

The firm’s office expansion was recently completed, the deal having been negotiated in the third quarter of last year. It’s a five-year lease with a full-service rental rate in the mid-$30s per square foot, Howard Jensen, a vice president with landlord The Peterson Cos., said in an email.

Sharaf called the office expansion decision “strategic,” noting that it sits at a regional crossroads. Located near where Interstate 295 hits the Capital Beltway, it provides direct highway access to Virginia, Maryland and the District.

National Harbor isn’t on Metro and won’t be any time in the near future — though the regional transit authority has contemplated building out the Blue Line from D.C. southward. Arlington County and Alexandria, in particular, have the advantage there, to the extent transit-oriented orthodoxy correctly believes people want to live and work in dense, Metro-accessible places. Metro stations at the Pentagon, Rosslyn and Pentagon City — all in Arlington County — historically boast the highest ridership outside of D.C., according to transit authority data.

Whereas the advantages of being on Metro are regarded in the real estate world as “the 11th Commandment, carved in stone,” Cloudforce has taken “a contrarian approach and has done well by it,” Jensen said. He called National Harbor “a little gem of an office market for tenants not locked into Metromania.”

It’s $5 to $7 cheaper per square foot than comparable buildings within easy walking distance from a rail station along the Metro corridor running through National Landing and Rosslyn, according to Jensen. A second quarter office space report from JLL put the average direct asking rent in Oxon Hill-Fort Washington at $28.52, versus $43.02 in Crystal City, $45.53 in Rosslyn and $60.17 in D.C.

Moreover, National Harbor is closer to “a wealth of talented employees living in Anne Arundel County and southern Maryland who simply will not cross the river to work in D.C. or Fairfax,” Jensen said.

National Harbor also invested a great deal in so-called place-making, which Sharaf sees as having paid dividends. He said the attractiveness to employees and clients of the MGM National Harbor hotel and casino, Gaylord National Resort & Convention Center and surrounding retail and restaurants “can’t be understated.”

In addition to being home to some 2,500 permanent residents, National Harbor attracts 20 million visitors per year. And it’s still growing. The development is marketing two fully entitled sites for 2-million square feet of corporate headquarters.

Just north across the Beltway, in Forest Heights, another developer recently advanced planning for National View, including up to nearly 1,900 multifamily residential units and 289,000 square feet of office, commercial and retail.

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