Developments Bringing New Life To Ballston Could Help Reduce Office Vacancy
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The National Science Foundation's 2017 departure to Alexandria left a 700K SF vacancy in Ballston's already-struggling office market, but the redevelopment of its former home and a wave of new activity nearby is bringing new promise to the Arlington neighborhood.
Several retailers have already opened in Jamestown's redevelopment of the former NSF headquarters, rebranded as Ballston Exchange. The $330M Ballston Quarter redevelopment has slowly opened over the last few months with a host of experiential retail concepts and dining offerings.
The area's first vertical mixed-use building, a 22-story tower at Shooshan Cos.' Liberty Center complex with office, residential and retail, is set to open early next year, along with Saul Centers' Target-anchored apartment building.
Having four major developments delivering around the same time in the heart of Ballston has brought a much-needed jolt of energy to the area's office market, local stakeholders say.
The 7.4M SF of office inventory in Ballston had a 25.9% vacancy rate as of Q4, according to Newmark Knight Frank. But new leases and touring activity signal the area's ongoing wave of retail openings is making it more attractive to office users, said JLL Managing Director Herb Mansinne, who is managing leasing at Ballston Exchange and Liberty Center.
"You could never have sequenced this," Mansinne said. "It would have taken pixie dust to sequence the delivery at this time of all of this; the residential, the mall, the office repositioning and now the backfilling by all these private sector tenants. It's magnificent."
Ballston Exchange last month signed Booz Allen Hamilton to an 18K SF lease on the seventh floor of the 4121 Wilson Building, Jamestown President Michael Phillips told Bisnow. The developer in June signed Industrious to open a 25K SF coworking space on the third floor of the 4201 Wilson building. Several other small-to-midsize tenants are in negotiations and could sign soon, Phillips said.
Jamestown bought the buildings for $300M in 2015 after NSF had announced plans to move out and launched $140M renovation. It included 109K SF of retail on the lower three floors, reducing the total office space to 670K SF. Phillips said it has sought to benefit from the growing presence of corporate tenants in the Ballston submarket.
"We saw a switch to the private sector increasingly from something that had been a significant public and association play," Phillips said.
The developer has signed retailers including Cava, Philz Coffee, Shake Shack, health food concept Dirt, We the Pizza and barbershop Bearded Goat, and the first four are already open. Phillips said it is also benefiting from the timing of Ballston Quarter's opening across the street.
"Our plan had been with Ballston Quarter opening at the same time we're opening, we're all delivering this new 24-hour experience in Ballston, which is truly compelling, with urban transit and shopping and living and office all together, that we would be in a good position," Phillips said.
Punch Bowl Social opened its 25K SF restaurant, bowling alley and entertainment venue at Ballston Quarter in December. Additional experiential concepts, including live-action entertainment venue 5 Wits and indoor play space Nook, have opened, with a cooking school, painting bar and boxing gym coming soon. The Ballston Quarter development was led by Forest City Realty Trust, which was acquired by Brookfield last year.
The development's 25K SF Quarter Market food hall had planned to open last month but was delayed. One vendor, Mi & Yu Noodle Bar, opened last weekend. Brookfield Senior Vice President of Develoment Will Voegele, in a statement provided to Bisnow, said chicken sandwich concept Hot Lola's and restaurant and bar Copa will open within the next week, followed by several others opening on a rolling basis throughout March and April.
"We've needed this," Ballston BID CEO Tina Leone said of the retail openings. "We've needed opportunities for people to connect."
The opening of the original Parkington Shopping Center on the site in the 1950s and the expanded Ballston Common Mall in the 1980s spurred two previous generations of development in the area, and Leone said Ballston Quarter's opening is now having a similar effect.
"As Ballston Quarter became more and more real, you could see more and more plans being discussed with the county staff," Leone said. "That project was absolutely a catalyst for what we're seeing now."
Across North Glebe Road from Ballston Quarter, a Georgia-based developer filed plans in December to build a 685-unit project on the site of the neighborhood's Harris Teeter, with the grocery store reopening in the new building.
Shooshan Cos. is preparing for an early 2020 delivery for the 22-story vertical mixed-use tower at 4040 Wilson Blvd., the eighth and final phase of its Liberty Center development. The building, a partnership with Brandywine Realty Trust, will feature retail on the first two floors, followed by eight floors of office and 12 floors of residential on top.
The developer signed Vida Fitness to anchor the retail, and in December 2017 it signed AvalonBay Communities for the top three-and-a-half floors of office space. The multifamily REIT is moving from another Ballston office building across the street, but Leone said it was still a big win for the submarket.
"Everyone was concerned maybe AvalonBay wouldn't stay in Ballston," Leone said. "We all worked to make sure AvalonBay knew they were loved and we wanted them to stay in Ballston."
Mansinne said tenants are in negotiations for the majority of the remaining office space and he expects it will be over 90% leased by the time it delivers early next year.
"Our activity comes from tenants that are currently in Tysons, tenants that are in Downtown D.C., in Crystal City and Alexandria," Mansinne said. "Our activity is coming from all over as Ballston has become this new reimagined place where there's opportunity."
Filling up space in a market that is over 25% vacant will not happen overnight, Leone acknowledged, but she is optimistic about the momentum the market is experiencing.
"What we've been seeing is smaller lease deals, but it's been steady," Leone said.
The smaller deals will help the Ballston office market remain stable, Mansinne said, because it won't have the risk of losing a large anchor tenant like NSF and suddenly having hundreds of thousands of square feet vacant. Mansinne thinks the area could also benefit from Amazon HQ2 in nearby National Landing, first in the form of residential demand and later in the office market.
"It is inevitable it will happen in concentric circles out from National Landing, and that tide lifting will benefit the Rosslyn-Ballston corridor," Mansinne said.