Herndon, Reston Developments Move Forward While Silver Line Opening Moves Backward
The Reston-Herndon submarket has a large pipeline of development moving forward, buoyed by the area's growing technology sector, and much of that growth is planned around current and future Silver Line stations.
The Silver Line's second phase has experienced considerable delays. It was initially scheduled to open in 2018, four years after the first phase finished. Then the opening date was pushed back to 2020. It didn't open last year, with Metro officials saying in December that it would be delayed until at least fall of 2021. Last month, officials said the opening was pushed back again to early 2022.
These delays haven't changed the positive long-term outlook developers have for the Reston-Herndon submarket, as projects continue to move through planning, but they have added challenges to those under construction and looking to break ground.
"Any time you introduce a change, it introduces risk to the developers and lenders," Hoskins said. "You always get a pause when something that was expected to happen didn't happen. I think the fact that it's delayed has affected people's plans in what I consider the short term."
Hoskins said the uncertainty caused by the Silver Line delays has been exacerbated by the impact the coronavirus pandemic has had on transit usage, but he thinks Metro ridership will eventually return to pre-pandemic levels over the long term.
"It's really had a compounding effect on the market, I'd say, but it's more on the side of delaying the market than totally disrupting and causing people to not want to develop," Hoskins said.
Strong office leasing in the Reston-Herndon submarket over the last few years has led to new office development breaking ground, especially at Reston Town Center.
Boston Properties is under construction on the next phase of Reston Town Center after landing pre-leases with Fannie Mae and Volkswagen. Boston Properties Director of Leasing Sam Orr said the 1.1M SF project, branded as RTC Next, is scheduled to deliver this fall.
The developer is planning another 80K SF boutique office building, and it has continued to sign leases at existing Reston Town Center buildings. It landed the largest new office lease in the D.C. area last year, a 400K SF deal with Microsoft at Reston Town Center's Two Freedom Square building.
Orr said he has continued to see strong touring activity at the Reston Town Center's office buildings, and he said the proximity of the under-construction Metro station has been a major selling point for new tenants.
"On tours, people always ask about it and seem pretty excited about it," Orr said of the Metro station. "Having the station directly adjacent to RTC Next and a short walk to the urban core is a huge benefit."
The uncertainty around the Metro's delayed opening can be challenging, Orr said, as he prefers to have clear, accurate information to give prospective tenants when they ask about the Metro station.
"It's great to know that the Metro will be coming soon, and understanding the date is important not only from a leasing perspective but from everyone's perspective to know when they have that option," Orr said. "When we're asked on tours, we obviously try to provide the most accurate information we have. So if we said it was delivering in August of 2021 and it's really August of 2022, we just want to be accurate with what we're telling prospective tenants."
Reston has the most office space under construction of any submarket in Northern Virginia with 1.4M SF, according to Newmark's Q1 report. The report pegged the office vacancy rate in Reston at 16.7%, below the Northern Virginia average of 19.6%.
The Silver Line has also been a major driver of multifamily demand in the Reston-Herndon submarket.
The first residents are scheduled to move in Thursday at Faraday Park, a new 400-unit development from Rooney Properties and Bozzuto. The project at 11201 Reston Station Blvd. sits less than a half-mile from the Wiehle-Reston East station, the terminus of the Silver Line's first phase that has been open since 2014.
Rooney Properties Director of Development and Construction Chris Oursler said he has been surprised at the level of demand he has seen since the building began leasing in February. He said the new office tenants Comstock has signed at Reston Station, including Google, Rolls-Royce North America and ICF International, have helped create demand for apartments in the area.
Oursler also said he sees the Metro station as a key demand driver, as it already provides access to Tysons, Arlington and the District. He said he thinks its value will be even greater when Phase 2 opens and connects the Wiehle station to Reston Town Center, Herndon, Dulles International Airport and beyond, but he doesn't think the delay has had much of a negative impact on his project.
"The real value of Metro comes when it's completed, when it's going both ways, so if I need to get to Dulles, I can get there quickly and I don't need a car," Oursler said. "But it's not something we're completely banking on. It's not like if the Metro's not open the project's not going to be successful."
In Herndon, most of the transit-oriented development around the Silver Line Phase 2 stations is still in the planning phase. There are two Metro stops coming in and around the town: the Herndon station near the intersection of the Dulles Toll Road and Van Buren Street, and the Innovation Center station, which sits on the edge of Herndon and Loudoun County.
Herndon Director of Community Development Lisa Gilleran said developers in the town hadn't tried to time up their projects with the Metro station's opening, so the delays haven't had much of an impact.
"I've heard some people say that you don't necessarily want to have your building ready on [Metro's] opening day, because that's not really when you've got the density that you want. It has to build up," Gilleran said.
Stanley Martin Homes plans to deliver the first buildings at its 155-unit Liberty Park project near the Innovation Center station this fall, Stanley Martin Vice President of Sales and Marketing Jessica Martin wrote in emailed responses to Bisnow. The project is planned to include condos and townhouses ranging from two to four bedrooms.
"Being walking distance from the new Innovation Center Metro station is a very attractive feature of the Liberty Park neighborhood," Martin wrote. She added that the development hasn't been impacted by the Metro's delayed opening.
Herndon has multiple major transit-oriented developments that have moved forward in the planning stages over the last year. Quadrangle Development in August filed plans for a 1.5M SF project that included two office buildings and two residential buildings near the future Herndon Metro station.
Last month, the Washington Business Journal reported that the development team behind a 103-acre project near the Innovation Center station is preparing to file plans for a $5B development. The project, branded as Rivana at Innovation Station, would include 80 acres from the development site branded as The Hub, plus 23 acres from the Center for Innovative Technology campus.
The development, a partnership between Origami Capital Partners, Timberline Real Estate Partners, Open Realty Advisors and Reebes, is planned to include 1.8M SF of office space, 1,550 apartments, retail and two parks.
Gilleran said she sees this major project as "exciting" for the Herndon area, and she said the town is studying its potential impacts.
"A development like that clearly has advantages for the town, and it can also have some impacts we need to watch carefully, such as traffic," Gilleran said. "We'll have some comments to go back to Loudoun County about that. But we're looking forward to something that appears to be pretty exciting on our doorstep."
Hoskins said he sees these major projects moving through the planning stages as a sign that investors are still bullish on the long-term appeal of transit-oriented development around Herndon and Reston's future Silver Line stations.
"Those are votes of confidence because you know planning these large-scale projects is expensive," Hoskins said. "These are clear signals that there is a good market ahead."
Developers and local officials will discuss the Silver Line April 21 on Bisnow's Greater D.C. Transit-Oriented Development digital summit.