Why All Development Opportunities in the R-B Corridor Aren't Equal
Arlington's Rosslyn-Ballston Corridor is one of the region's strongest multifamily submarkets, but the office market tells a different story. That’s why we’re hosting developers building both product types at Bisnow's Future of Rosslyn-Ballston Corridor event on Nov. 18 at the Westin Arlington Gateway.
Among our speakers is Shooshan Co founder and chairman John Shooshan (on the right, with his family), who's been developing in Arlington for decades, culminating in the near-completion of his eight-building, two-block Liberty Center project. The final piece of the complex is a 20-story, 425k SF office tower across the street from Ballston Mall, 4040 Wilson Blvd—whose renovation is sure to be a hot conversation topic this week. The office tower is on hold—the garage has been built underground—until the company can sign an office anchor. But they, like everyone else in Arlington of late, haven’t had any takers just yet. Arlington’s main private tenant base has been defense contractors, but congressional uncertainty is hamstringing their real estate decisions. “A large tenant we were tracking just renewed a lease for three years,” John told Bisnow this week. “You can’t expect a company to make a long-term decision because its client, the government, only finalized a two-year budget.” John says the company's been exploring a possible repurposing of the building by potentially introducing some additional uses with the same overall tower density, such as two-story retail and even some residential on the uppermost floors.
And while no one knows what’s going to happen in next year’s presidential election—or when Congress will start to resemble a functioning government again—folks are generally bullish on the corridor long-term. That’s why Penzance has been able to sell 3001 and 3003 Washington Blvd (above) in Clarendon (two office buildings) for a combined $199M in the last year. And John believes Ballston—which will soon lose the National Science Foundation and all its related business and lodging benefits to Alexandria—“is about to crest,” thanks to Ballston Quarter. “We think Ballston’s going to become the new downtown of Arlington.” Tech companies and educational organizations will be the key to that growth, as Virginia Tech, GWU and Marymount University all have facilities in the neighborhood. If that happens, it would surely benefit John's 165k SF Marymount office building, designed by Gensler and being built by Clear, now underway and scheduled for completion in fall 2017.
That building isn’t contributing yet to the 22.7% vacancy in the corridor in Q3, according to Colliers International. That high number is a result of the Base Realignment and Closure Act taking DoD offices away from Arlington and sequestration’s chilling effect on contractor spending. The cutback in government spending has put developers in a bind, JBG principal Andy VanHorn told Bisnow. “There’s a huge chunk of buildings that are empty, but could lease with $40 rents,” he says. “They are very difficult to take down because they have value, but they’re older product.” Many prognosticators expect government spending and job growth to fully rebound by 2017, which could ease the pain for existing product.
In 2018, Andy will cut the ribbon on CEB Tower (above), a gleaming, 31-story office building in Rosslyn in which CEB will occupy 65% of the 525k SF, with a provision to fill more if it turns out they need it by the time it opens (that’s why Andy’s not leasing the other 35%, which is all in the top floors, just yet). Next door, JBG is building a 377-unit, 31-story luxury apartment building, a shining beacon of the second city, and second story of the R-B Corridor: the multifamily market. “The multifamily continues to be very active and desirable,” John says. And nowhere is that more present than in the neighborhood in the middle of the corridor: Clarendon.
Clarendon was named the top neighborhood in the region for Millennials last year. It’s home to a Trader Joe’s, a Whole Foods, an Apple Store and the most active nightlife in NoVa. “Without a doubt, Clarendon’s become the most sought-after residential market,” John says. His family’s company just won approval to develop a three-building, 584-unit rental community where Red Top Cab’s lot and offices sit now (above). “It’s by God’s grace we got that deal,” he says. There are a handful of new and upcoming developments in the neighborhood: there’s ZOM’s Beacon Clarendon West, opened last year; Shooshan’s project; and 10th Street Flats, a 145-unit project from Clark Realty Capital. The other ends of the corridor have a lot more in the works. To learn more, we hope you'll join us for Bisnow's Future of the Rosslyn-Ballston Corridor on Wednesday, Nov. 18, at the Westin Arlington Gateway. Sign up here!