Alexandria’s Potomac Yard neighborhood was thrust into the spotlight over the last several months, as it went from winning a $2B sports and entertainment district with an NBA and NHL arena to losing it all seemingly overnight.

In an economic environment where little is getting built, the project would have been one of the largest in the region. But the plan to use taxpayer dollars was met with pushback from some in state government — pushback which ultimately killed the deal.

Following that whiplash, the officials and developers representing the Potomac Yard neighborhood are thinking about what’s next for the 12-acre site and the larger Potomac Yard area now that it's no longer poised to be the new home for the Washington Capitals and Wizards.

At Bisnow’s Future of Alexandria event last week, held at the Sheraton Suites Old Town Alexandria hotel, leaders in the area discussed lessons learned from the saga and how to best position the site so that it delivers the most benefit to the county.

“What has happened in its aftermath is a whole bunch of other folks are looking at the potential of that site, and now end up having a lot of conversations with us in the city,” Alexandria Mayor Justin Wilson said onstage. “And those are very active conversations involving our economic development partnership and our city staff about what might be possible there.”

The arena proposal had the benefit of key components that panelists said are important for large-scale developments to move forward in this economic environment: it was a public-private partnership, and it would have been catalyzed by an anchor to draw people and business.

The development would have also significantly added to the commercial tax base without adding more residents who would add more stress to city resources, a benefit Wilson said is needed during a time when the city is struggling to cover its costs.

“Without large swings that re-characterize our tax base, you're going to continue to have low single-digit growth in our tax base,” he said. “Every year, you're in a situation where you're either cutting services or raising taxes or some combination thereof. And there is a point where that becomes unsustainable.”

The Potomac Yard area, next to a newly opened Metro station, is already poised to host Virginia Tech’s $1B Innovation Campus, with the first academic building now expected to open early next year. It also houses a Target-anchored shopping center directly to the west of the Metro station that has been planned for redevelopment.

The area was originally approved in 2020 for an office-heavy mixed-use district around the Virginia Tech campus to be developed by JBG Smith. But in a postpandemic world, that is likely not a viable path forward.

“The mix of uses that were envisioned with that small area plan for that district are probably not appropriate anymore given the change in kind of a live, work, office environment,”  Whitaker Investment Corp. President Ryan Whitaker said.

When looking at the new vision for the neighborhood, panelists said the city needs to look for an anchor.

“Landmark Mall clearly is a good example where the hospital will kind of anchor a lot of development,” Wilson said.

Foulger Pratt partnered with Howard Hughes Corp. and Seritage Growth Properties to redevelop the 1960s-era Landmark Mall, now rebranded as WestEnd. The 52-acre site is planned for 4M SF of development, with Inova Health System as its anchor. The $1B hospital campus totaling nearly 1M SF is expected to open in 2028.

The arena project was scrutinized for the way public money was structured to help pay for the development — scrutiny which ultimately led to its downfall.

But panelists said those kinds of partnerships have been crucial to the success of all of the area’s large-scale plans.

“For the purists out there, who kind of recoiled on that part of the last proposal, I would urge them to kind of review what we have been doing for a while,” Wilson said.

The Landmark redevelopment would have “died on the vine” if it hadn’t been for the financing structure that Alexandria put in place, Foulger Pratt Senior Vice President of Development Jay Kelly said.

“What we’ve experienced in Alexandria is a true partnership across the board between the elected officials and staff and ourselves,” Kelly said. “And there's been a singularity of purpose to redevelop the mall.”

He said Alexandria issued general obligation debt for the Landmark Mall project.

“And that was Alexandra really stepping up and saying, ‘we're going to make a commitment to the site, we know we're going to put this on our balance sheet,’” he said.

In return for the initial investment, he argued that the project itself gives back to the community with a new hospital, 2,500 residential units and four acres of public space, in addition to “ancillary” public benefits like stormwater management and bike lanes that come with the development.

But another benefit of large-scale projects like Landmark and whatever happens at Potomac Yard is commercial tax revenue, which is especially important as the city is no longer able to rely on the office market like it used to.

“I do think everyone's got to understand that, you know, something has to be done to turn over the tax base,” Carr Cos. President Austin Flajser said.

“That was obviously the driver behind [the Arena project]. And hopefully, we'll find something else behind it,” he added.

Wilson said that even though the arena was a huge loss, there were some bright spots that came out of the process. It made people reckon with the economic challenges and risks in the city, he said. On top of that, the headline-making story with a surprise ending also meant that the site is now top of people’s minds and ripe for a new crop of ideas.

“While obviously we took a very big swing, and it was unsuccessful, I think in the end there's some real positives that come out of that,” he said. “We just spent a several month period advertising the potential of Potomac Yard and what can happen there, both the size —  the physical size of that location — but also the opportunity there.”