Walker Webcast: JBG Smith’s Kelly Sees HQ2 as “Unbelievable Demand Driver”

“What we have here in Amazon is an unbelievable demand driver” for multifamily as well as office, JBG Smith CEO Matt Kelly said on this week’s Walker Webcast. The Bethesda, MD-based owner/developer is building out Amazon’s ambitious HQ2 campus in Arlington, VA’s National Landing submarket—and like Rome, it won’t be built in a day. Kelly called the 4.7-million-square-foot project a catalyst for “a multi-decade run of incredible growth.” 

Along the way, accommodating HQ2’s employee base—in particular, the projected 20%, or 8,000 employees, who will want to be able to walk or bike to work—will help JBG Smith shift its portfolio concentration from office to apartments. Sheer size isn’t the only dynamic here, though: JBG Smith and AT&T are partnering to create what’s believed to be the first 5G smart city at scale within National Landing. 

The connectivity will benefit Amazon’s operations at HQ2, naturally, but the intent is that it will also serve as a magnet for other innovators. “We want them to come here” as office tenants because they can take advantage of a level of connectivity they won’t find elsewhere, Kelly told Walker & Dunlop CEO Willy Walker. 

In common with Walker & Dunlop, JBG Smith is headquartered in the Washington, DC metro area and has achieved considerable scale from what began as a relatively small, privately held regional operation.  Where the two companies differ, though, is that while Walker & Dunlop has expanded nationally since going public, JBG Smith has remained focused on DC. That’s despite the fact that some have asked Kelly when he plans to plant a flag in other markets. 

There’s a home-court advantage that JBG Smith has in DC, Kelly told Walker. Moreover, it’s an advantage the company wouldn’t necessarily enjoy going up against other local or regional powerhouses in other cities. “We have always had considerable opportunity in our home market,” he said. 

That advantage is even greater now thanks to Amazon’s decision on where to build its second headquarters. “There’s nowhere else we could invest and find that set of tailwinds,” said Kelly. 

The portfolio’s current emphasis on office isn’t the headwind it might seem as the pandemic flares up again. Kelly said his team isn’t seeing tenants either cutting back significantly on their square footage or making many shorter-term commitments. Instead, conversations are revolving around the best use of their space “after all this is over.” 

The St. Louis native, who joined what was then known as the JBG Companies in 2004, had never run a company prior to being named CEO upon JBG’s merger with Vornado Realty Trust subsidiary Charles E. Smith Companies in 2017. That same year, Kelly was named “CEO of the year” by the Washington Business Journal. 

Kelly wouldn’t necessarily agree with a friend’s characterization of him as “a status quo breaker.” However, he said, “I tend not to take things at face value without questioning why.” He doesn’t believe in doing something the way it has always been done simply because it’s always been done that way. 

On-demand replays of the August 11 webcast are available by clicking here and through Walker & Dunlop’s Driven by Insight podcast series.