With Depressed Office Demand, Tysons Developers Look To Residential, Hotel Uses
Cityline Partners still has 4M SF of office space planned at its Scotts Run development in Tysons, but the only projects moving ahead at the vast site near the McLean Metro station are multifamily and hotel.
With the region's already weak office market not expected to recover in the near future, that trend is poised to continue.
After selling a parcel to Lodgeworks in 2018 for its 178-room Archer Hotel that opened in 2021, Cityline sold another parcel to Skanska for a 28-story multifamily building that is slated to deliver this year. It then sold another site in 2020 to Lennar Multifamily Communities — which has since rebranded to Quarterra Multifamily — for a 26-story building that is expected to break ground this year. And Cityline has now reached a deal to sell another parcel to a hotel developer.
KM Hotels LLC reached a deal to acquire a piece of Scotts Run from Cityline that had previously been planned for an office building, and the buyer has an agreement with Hilton to open a dual-flag hotel with its Canopy and Home2 Suites brands, Cityline Managing Director Donna Shafer tells Bisnow.
Shafer said the deal was initiated by KM Hotels, which reached out to Cityline with interest in the Scotts Run development. After studying available sites, KM zeroed in on a parcel that had previously been planned for an office building of up to 405K SF, and this week Cityline filed rezoning plans to instead build a 227K SF hotel on that parcel.
"Right now there is very little activity in the office market," Shafer told Bisnow. "If there's an opportunity for an alternative use we need to welcome it with open arms."
The hotel is planned to include a rooftop restaurant and bar and about 5K SF of retail. She said the project will help generate more attention and activity at Scotts Run, especially given its location about a mile from Hilton's corporate headquarters.
"This is going to be a very important hotel to [Hilton]," Shafer said. "They’re going to be very focused on making sure this is a terrific showcase ... They’ll have a lot of attention to the retail space and making sure the street is activated and energized."
The area surrounding the McLean Metro station already has a heavy concentration of office buildings, ranging from old suburban-style campuses to shiny new skyscrapers.
Capital One's new 470-foot-tall headquarters building opened in 2018 on the opposite side of the McLean station from Scotts Run, and in January the banking giant began moving employees into the third office building on the campus, which also includes a Wegmans, a concert hall, a rooftop beer garden and a park.
Some of the office buildings closer to Scotts Run are less in line with the walkable, mixed-use development that is in fashion today, but that has the potential to change.
Northrop Grumman retained JLL last month to market its two-building, 602K SF office complex on a 12-acre site at 7555 Wilshire Drive, a stone's throw from Scotts Run. Bisnow obtained JLL's offering memorandum for the property, which pitches the site as a long-term redevelopment opportunity with the potential for a residential conversion. The Washington Business Journal first reported the listing.
The marketing materials said the building is being offered "substantially vacant," but there is an ability to negotiate a partial sale-leaseback deal. Some of the Northrop Grumman divisions that operated in the building were sold in 2021 to Peraton, which moved them to Bowie, WBJ reported. Northrop Grumman and JLL declined to comment for this story.
Shafer said she had a land use attorney look at the Northrop Grumman property to determine how viable it was for an alternate use other than office, and "the expectation was it'll be an uphill battle." She said she isn't pursuing a deal for that site, but is interested to see what happens on it.
"Scotts Run is 6.5M SF, so we sort of feel like we stand on our own," Shafer said. "We welcome and work together with other neighbors, whether Capital One, LCOR, Skanska, etc. But we don’t feel our success would rise or fall with what happens on that site."
Skanska Executive Vice President Mark Carroll, whose development firm is preparing to deliver its apartment building at Scotts Run this year, said he can't comment on whether the firm is looking at the Northrop Grumman site. But he said he hopes to see it activated with uses other than office.
"We would like to see if someone comes in there to try to do something that would complement the master plan for Scotts Run, and some of that would be to further support this mix of uses," Carroll said. "It would certainly help get more people in the area, create more nightlife around the streets."
Creating street-level activity has been a main focus for Skanska at its Heming project, which includes 38K SF of retail.
Skanska hasn't finalized any retail leases that Carroll could announce, but he said it is in talks with multiple food and beverage groups and a small-format fitness user.
"We've got quite a bit of interest," he said.
He said the 410 apartments at the project will begin welcoming residents this year, in the late summer to early fall, and he expects that new residential density will drive more retail activity.
"If you look at the overall mix of office versus multifamily in Tysons, there's been a need for more multifamily for a long time," Carroll said. "We'll be the first high-rise apartment building in Tysons in a couple years ... We're the first one delivering inside the Beltway in the Scotts Run, McLean Metro area. We really like it there."
Carroll said the Archer hotel has helped drive activity to the area, and he thinks the Hilton hotel would be a valuable addition.
"We’d encourage the further development of multifamily, hotel, along with hopefully be more retail, so we can continue that sense of place," Carroll said.
Tysons Community Alliance Deputy Director Drew Sunderland, whose organization rebranded last year from the Tysons Partnership, said he sees the area as ripe for more hotels. The November opening of the Silver Line's Phase 2 connected Tysons directly to Dulles International Airport to the west, and it was already connected to Arlington and D.C. to the east.
"We certainly view a massive opportunity leveraging the Silver Line and now the direct connection to Dulles to think of Tysons as a hub for convening," he said. "We have some great existing hotels, ones that continue to perform at a high level, and we also now have this vital connection to a major international airport, while also being connected directly to Downtown D.C. So Tysons as a whole is strategically positioned to be a major hospitality and convening hub."
Sunderland declined to comment on individual properties switching from office to other uses. But he said conversions are a trend that TCA and its partners are studying, as the office market has changed dramatically since Fairfax County adopted a long-term master plan for Tysons' land use in 2010. The plan envisioned around 51M SF of office development and 46M SF of residential.
While there has been some demand for new trophy office buildings near Metro stations, such as TMG's Boro Tower, Sunderland said the Tysons area has a large number of older, car-oriented office buildings that could be transformed to other uses. He said he's focused not only on long-term redevelopments of sites, but on short-term uses like beer gardens, which have opened on planned development sites at The Boro and Scotts Run.
“What are some of these small business placemaking opportunities, but also what are some opportunities to potentially reposition for other uses as well? That will certainly be part of the discussion," Sunderland said. "It’s a part of the discussion that I’m frankly most excited about, because there’s an opportunity for us to activate Tysons outside of the new development that’s emerging largely around those four Metros.”