Virginia Tech, Inova Kick-Start Massive Alexandria Projects With $1B Investments
Two of the largest mixed-use projects in the D.C. region are moving forward in Alexandria, spurred on by major institutions that have committed to anchor the developments with billion-dollar campuses.
The 20-acre Potomac Yard redevelopment, anchored by the Virginia Tech Innovation Campus, and the 52-acre Landmark Mall redevelopment, anchored by an Inova Health System hospital, have both taken key steps forward over the past six months. The two development teams said they see these anchors as catalysts to move the projects forward and help differentiate them in the market.
In January, JBG Smith began demolition and infrastructure work on the Potomac Yard project, planned to include 2M SF of mixed-use development, and Virginia Tech is expected to begin construction this fall on the first building of its $1B campus.
Weeks earlier, The Howard Hughes Corp. and Seritage Growth Properties, the owners of the Landmark Mall site, brought on Foulger-Pratt as a joint venture partner and announced they reached a deal with Inova Health System to anchor the long-planned redevelopment. The development team is going through the approval process for the 4M SF development and expects to break ground in 2023.
These projects sit on opposite sides of Alexandria, but they represent similar success stories for the city's economic development strategy. Alexandria Economic Development Partnership CEO Stephanie Landrum said her team has spent the past five years actively seeking out anchors to help kick-start major projects and differentiate them from other developments happening in the region.
"We are in a region where there's investment and activity happening everywhere, and the goal is to differentiate ourselves," she said. "So the way to do that is to find these unique anchors like Inova Hospital, like Virginia Tech, that bring with them billions of dollars in investment and are creating the momentum for the redevelopment."
JBG Smith, the same developer that is partnering with Amazon on its second headquarters a few miles north in Arlington, is serving as master developer for the Virginia Tech campus and the surrounding mixed-use development. The REIT announced May 4 it reached a joint venture agreement with J.P. Morgan Global Alternatives, which advises institutional investors that own a portion of the site, to develop and manage the 2M SF project.
The development team has demolished the former Regal Potomac Yard movie theater building on the site and is currently working on infrastructure to enable the first phase of development, JBG Smith Senior Vice President Bailey Edelson told Bisnow in an interview.
Edelson said construction is expected to begin this fall on the first building of the Virginia Tech campus, and construction could start within the next 12 months on the first two multifamily buildings totaling 419K SF. She also sees the Virginia Tech campus as a way to make the development stand out in the region.
"There's a lot of mixed-use development in the area, and each one has had to figure out what is this place doing that's different than the others," Edelson said. "We are all usually looking for what is that anchor, what is that draw. It can be a lot of different things, and here, Virginia Tech has definitely been that for us."
The future Potomac Yard Metro station, a new infill stop on the yellow line expected to open in spring 2022, has also served as a catalyst for the development, Edelson said.
"Having the Metro here was a huge piece to enabling the planned redevelopment," Edelson said. "It's hugely important to be able to build out the kind of neighborhood and have the connectivity to the north and south."
Landrum said the Metro station has created a new office market in the Potomac Yard area. In the years since it has been planned, the neighborhood has landed three large office tenants to anchor new buildings: the American Physical Therapy Association, the National Industries for the Blind and the Institute for Defense Analyses.
"There’s very little office space that gets built not within a half-mile of a Metro station," Landrum said. "So for us to be able to credibly call Potomac Yard a mixed-use market with office, we needed to make that investment in mass transit so that it was viable."
Landrum expects the Virginia Tech campus will draw additional demand for office space, as companies will look to recruit talent from the university, and the JBG Smith development team is aiming to accommodate that demand.
The team has 980K SF of office space planned across four buildings at the development, Edelson said. She thinks the Virginia Tech campus will be a draw for companies to move to the area.
"Part of the plan in building out that district is giving companies commercial spaces in which to do business and be able to partner with and be adjacent to Virginia Tech," Edelson said.
Just as the Virginia Tech campus is expected to spur office demand, the Inova hospital at the Landmark Mall project is expected to create demand for medical office and retail.
Foulger-Pratt Chief Operating Officer Brigg Bunker said the Landmark Mall development team will likely build new medical office space as part of the project, in addition to the medical office space that Inova is planning as part of its campus.
Inova in December said it plans to invest $1B to relocate and expand its Alexandria hospital, and it plans to bring 2,000 healthcare workers to the derelict mall site. Bunker said medical office users typically want to locate near a hospital or in a shopping center with retail tenants that drive foot traffic.
"With this situation it is both; it's a co-location with retail as well as the hospital system, and so there should be good opportunity, and I could see medical practices and others being interested in being located there," Bunker said.
Inova is relocating its Alexandria hospital from 4320 Seminary Road, a property that doesn't have a mix of uses surrounding it. Landrum said her team has worked with the hospital for years, and one of its main priorities was finding a location that has medical office space within the same campus.
"Right now, there's an office building where a lot of the doctors who are based at the hospital have their private practices, and it's not on the campus because there wasn't room for it," Landrum said. "That's always been a pain point. They wanted more offices, and they wanted it to be in a campus setting."
The Landmark Mall development team in April filed a Coordinated Development District application that laid out the specific uses envisioned for the site. The plan calls for 4.2M SF of total development, including 990K SF for the hospital.
The application provided two options for the rest of the uses. One option would maximize the amount of residential space on the site with 2,500 units, plus 285K SF of retail and 210K SF of office and medical office. The other option would have 2,172 residential units plus 298K SF of retail, 400K SF of office and medical office and a 200-room hotel. The project would also have a 52K SF fire station and over 1M SF of parking in both scenarios.
Bunker said the team aims to break ground in 2023, and the first phase would consist of residential and retail. He expects the hospital and medical offices would help drive demand for the retail space at the project.
"Bringing that daytime traffic is really important for our retail, and the amount of employees that the hospital has, that's an important component," Bunker said.
The team is looking to land grocery, fitness and entertainment tenants as retail anchors, plus a variety of restaurants and convenience retail, Bunker said.
The center of the project would have about 1 acre of open space, including a park and two central plazas, and it would have a 2.6-acre park along Van Dorn Street.
"The west end of Alexandria is starved for a place to have a community gathering space," Bunker said. "The amount of public park space we're providing is important because we want this to be that third place that the community will come to, meaning they live in one place, work in a second place and then this is the third place."
The project is also planned to include a transit hub with stops for existing bus lines and new bus rapid transit lines that Bunker said will help drive traffic to the development.
Landrum said that these two projects adding thousands of housing units near transit will help address the housing affordability issue facing Alexandria and the rest of the region. She said there are many potential solutions to address affordability, but building more housing is undoubtedly one of them.
"In both areas, we're making sure we're building housing, especially in Potomac Yard where it's on a Metro station," Landrum said. "The same is true with Landmark where we're building in a transportation center ... These are places we should be looking at apartments and condominiums."
With the two large anchors secured for the Potomac Yard and Landmark Mall redevelopments, Landrum said her team is setting its sights on landing an anchor for a third major project: the Potomac River Generating Station site.
Hilco Redevelopment Partners in November acquired the 20-acre site of the former Alexandria power plant that was decommissioned in 2012, and it said it plans to build a mix of commercial and residential uses. The property is just north of Old Town Alexandria in an area that the city has designated as an arts district.
"One of the types of anchors we're currently looking for are arts and cultural, an institution of some sort," she said, adding that a museum, gallery or performing arts center could all be possibilities. "We're trying to look at all the sorts of uses that would be a great fit in the district, and also look at the specifics of that site and what makes it unique."