What Tysons Is Still Missing In 2016
There is no arguing Tysons’ fundamentals: it can stand on its own as a commercial center, and the multifamily is coming fast. But retail and homeownership (think condos) are the missing pieces for a new city that feels today, at times, “homogeneous and sterile,” Georgelas Group managing partner Aaron Georgelas says.
Aaron told the crowd of around 500 yesterday at Bisnow’s Tysons Tidal Wave event the idea of having some sort of ownership in Tysons is important. "When somebody comes to a rental property, they’re not trying to plant roots. We need [developers] to create ownership. That’s what Tysons needs.”
Everyone on hand at the 8280 Greensboro Dr’s fourth floor could look out the windows and see the activity in the area and remark on how much multifamily is getting ready to hit the Tysons market.
“Look at the cranes in Tysons,” Kettler SVP Pam Tyrell said. “There’s a lot of residential coming to Tysons. That’s the story line.”
Office developers have the security in knowing modern tenants are choosing quality over quantity—taking less space in more expensive offices—like never before. The room was brimming with optimism.
No one views Tysons with rosier-colored glasses than Tysons Partnership president Michael Caplin. Fairfax County’s assessments of Tysons land went up more than $1B in total value year-over-year in February, and land values have increased 44.1% since 2010. That’s $55M more in local revenues, and warm, fuzzy feelings for the partnership’s membership, a large number of whom were in the room.
Meridian Group managing director Gary Block and Pam have two of the biggest stakes in Tysons’ future while co-developing 4M SF at The Boro. The plan has already left an imprint on their developer neighbors: Foulger-Pratt SVP Michael Abrams said his company lowered the amount of retail it was planning for Tysons Central, acknowledging the powerful force that The Boro’s 250k SF of retail will be in the market.
“We’re very happy to draft off all that effort,” Michael said, drawing a warm laugh from Gary, on the left.
But, after hearing Transwestern managing director Elizabeth Norton’s presentation about the data behind Tysons market—with an assist from Bisnow's "Mic" Ponticelli—it would seem there’s plenty of room at the retail table in Tysons. The retail vacancy in Tysons is at less than 1%, while rent growth is over 5%, far outperforming other asset classes in Tysons and other retail submarkets in NoVa.
That’s just one of the reasons Gary was looking boisterous. In the first three minutes of his fireside chat with moderator Elizabeth Baker of Walsh, Colucci Lubely & Walsh (on the left) and Stephanie Pankiewicz of LandDesign, Gary remarked that speakers had already mentioned the Boro “15 or 20 times.”
And after buying three vacant office buildings in 2012, leasing 500k SF in two and a half years, and spending the last two years on a comprehensive development plan, The Boro is approved. It's coming.
“What tenants today want is retail, amenity-rich locations near Metro. Other CDPs that were filed were afraid of the mall, they’re afraid of retail,” he said. “We’re not afraid of that.”
After the Whole Foods and 70k SF luxury movie theater-anchored retail of The Boro arrives, the next step should be more focused on real community, Aaron said. Neighborhood retail from lesser-known, community-focused tenants should be encouraged.
“We need the organic places,” he implored. “The Clarendon Ballroom is not a creditworthy tenant, but it’s something people want to live around. Potbelly is a great tenant, but it’s not something that makes people go ‘I want to live here.’”
Cushman & Wakefield executive director Brian Tucker (holding the mic) stood up for Potbelly—if he didn’t, someone else surely would have—and asked the executive outlook panel he was moderating, which included Lerner Enterprises VP Jim Policaro and Cityline Partners managing director Mike Pedulla, how Tysons could be improved.
“Tenants would help,” Jim said with a look and a smile.
Brian signed EY and CSC to a combined 187k SF in 1775 Tysons, which received its certificate of occupancy this week. Despite Tysons clearly being on the upswing, despite its position as the fourth-largest employment center on the East Coast, behind New York, DC and Boston, and despite encouraging deals, office developers are still wary of moving too fast.
“There’s definitely demand there, and we recognize that,” Mike said. But Cityline Partners, a subsidiary of DLJ Real Estate Capital Partners that’s planning the Scotts Run and Arbor Row developments in Tysons East, decided to develop an office building below the maximum available density—not a typical move for developers in a growing area.
“We shrunk our project, it’s not as big as it could be,” Mike said. “We will not proceed without some leasing velocity.”