As Office Tenants Play Musical Chairs, Tysons Leaders Emphasize Need For Livable City
Tysons, Virginia, is one of the 15 largest office markets in the country, but the owners of some of the market’s top office properties said it needs more vibrancy if the area is to live up to its slogan: “America’s next great city.”
“We definitely are early,” Charlie Schwieger, vice president of asset management for The Meridian Group, said at Bisnow’s Future of Tysons event on Dec. 1 at the DoubleTree by Hilton Tysons Corner. “There's a long way to go to become America's next great city.”
Tysons is the largest office submarket in Northern Virginia, and developers have spent the past decade building around its Silver Line Metro stations, evolving from a mostly low-density suburb centered around the Tysons Corner Center mall into a destination for high-profile office tenants like Capital One.
But with the office market becoming more mature and underlying fundamentals for the sector weakening, developers are hoping a focus on other uses and amenities for the community will help Tysons become a city with its own identity separate from Washington, D.C.
“We certainly have a long way to go, but I think that the county has stated and given us developers a stated goal of truly transforming Tysons into a place that people don't just drive, work and leave, they're coming here on nights and weekends,” Schwieger said.
Schwieger’s firm owns some of the newest and largest real estate near Tysons’ Greensboro Metro station, including two new office towers that Schwieger said are almost fully leased. He said he has seen substantial interest for spaces on the lower floors of towers that were still leasing, indicating a desire from tenants to be in high-end offices even if it means taking a smaller or lower space.
“You look at that trophy, A to A+ category, and there's nothing available,” Schwieger said.
But office properties don’t have to age long in the submarket for some vacancies to arise. Jeff Roman, co-managing director at Stream Realty, said that sublease availability in trophy office buildings was on the rise and priced to move, putting Class-A buildings trying to lease up space of their own in a bind.
“We still have over a million square feet of sublease, and every time you take a look, there's more and more being added, and it's mostly trophy sublease,” Roman said. “Until we get through some of that sublease, it comes off the market, the Class A, A-plus is going to struggle a little bit.”
Tysons saw 360K SF of Class-A office space deliver so far this year, and it has the second-largest pipeline in the region — behind Crystal City, where Amazon’s HQ2 is under construction — according to the third-quarter Northern Virginia office report from JLL. Average rents for Class-A space in Tysons are $44 per SF, lower than the Rosslyn, Ballston and Clarendon/Court House/Virginia Square submarkets, per the report.
Schwieger said he was still seeing opportunities for rent growth in the top echelon of office properties. But he also acknowledged that in order for Tysons as a whole to keep growing, the submarket needed more than just trophy office properties.
Other developers in the market have come to the same conclusion. Just south of the McLean Metro station, Cityline Partners has begun building out Scott’s Run, a mixed-use campus with 11M SF of development potential.
The developer has been developing a plan for the site for over a decade, and it worked with Fairfax County early on to identify ways to improve the street grid and walkability in order to heighten the appeal for investors and residents interested in a mixed-use community in Tysons.
“We took a deep breath, borrowed trash bags of money and built out our road grid, which included the bike lanes,” Cityline Partners Managing Donna Shafer said. “That is proving to be very, very beneficial for us.”
Tracy Strunk, director of Fairfax County’s Department of Planning and Development, said her department has been getting more requests to convert projects entitled for office use to residential use. She said she is taking those requests seriously as the county government debates the proper mix of uses near Tysons’ Metro stations.
“The question that we have is, when you talk about that live and work mix, does that mean on an individual block basis? Does that mean on a four- or five-block or a 10-block or a mile? How close is close enough?” Strunk said. “Those are the things that I'm looking at right now.”