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August 8, 2014
Tysons may be all the buzz in the Northern Virginia retail world, but big changes are happening in Fairfax, too. (If you ask nicely, maybe your Silver Line driver will take a detour.)
The second-largest mall in Virginia—Fair Oaks—is finishing a multi-million dollar renovation to modernize and bring in more light (bad news for the Macy's lamp section). The 34-year-old, 1.6M SF mall, owned by Taubman, now has bigger skylights, lounges with comfy seating (seen here), free wi-fi and outlets, and several new stores and restaurants. Whiting-Turner will finish most of the renovations by November.
Marketing and sponsorship director Ed Cassidy says several of Taubman's malls are going through similar renovations. Destination shopping is making a comeback, and the mall has worked on moving around stores and bringing in new restaurants like Kona Grille, On The Border, La Crepe Bistro, and Brio Tuscan Grille. While malls like Springfield and Landmark get replaced with mixed-use projects, Fair Oaks is working with what it has. Ed argues that Fair Oaks is a type of mixed-use because it has a DMV and the Children's Science Museum is coming next spring. Surrounding the mall is 10MSF of office space.
Ed says the mall suffered from a lack of signage or main entrance. People going to the mall to eat at the Cheesecake Factory didn't realize there were 200 stores like Williams Sonoma and Michael Kors attached to it. The new entrance will have lots of glass and height to it, along with more signs around the circular structure. Ed says the mall will introduce an app this month to give shoppers sale alerts, and some stores will give shoppers a way to buy online in the store to end “retail showcasing.”
Another Five Years of Weak Demand?
Delta Associates CEO Greg Leisch (snapped at our BMAC West event earlier this year with CG Design and Development's Catherine Guentert) doesn't like to use the word "bubble." But there are some serious supply-and-demand questions. The nation's capital has seen solid job growth, but fewer of those jobs are office using, he says, creating major demand problems. "It's been happening for five years, and probably will for the next five," says Greg, who adds that federal cutbacks and office tenants in DC using less space per employee also cut into demand. But in a 400M SF office market that contains 250M SF of essentially obsolete space, developers still have an incentive to bring new, efficient space to the market, he adds.
Other markets, like Houston (pictured) are running into oversupply. Driven by booming growth in the energy industry, Houston has 17M SF of office under construction—equal to 7.5% of the city's total existing inventory. But with absorption hovering around 3M to 3.5M SF per year, developers there may be in for some lean years trying to lease buildings up, Greg says. New York may have a similar supply problem, but it's concentrated in Lower Manhattan. But not every major market faces such issues—Greg says Chicago is in equilibrium, since the debt and equity world has been hesitant to finance new office construction, and the new office supply of Dallas is basically in equal step with demand.
But even with supply concerns in the DC area, some jurisdictions are doing everything they can to encourage office development, Greg says. Falls Church is spending millions to incentivize new office construction, since it believes it would generate more financial benefits than costs.
Huntington Metro Ready to Bloom
The Alexandria neighborhood around the HuntingtonMetro is slowly transitioning, and MRP Realty's The Parker project is one of the latest bringing change. The company broke ground on a 360-unit apartment project in November and will have it ready by spring. MRP VP John Begert (left), working on the project with MRP Residential's Matt Robinson, says the area demands residential, and the location gives access to places like Carlyle, Old Town Alexandria, Route 1 south, and the Beltway. MRP has an additional 350k SF of commercial density on the Parker site, where the company will eventually develop office and retail. Until then it will serve as a park.
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