With 'Way Too Much Commodity Office,' Fairfax Developers Push To Take More Out Of Commission

Fairfax County's office sector — the country’s second-largest suburban market — is going through a reset.

The county, like many office submarkets, is seeing a growing valley between the trophy space tenants desire and everything else.

And Fairfax has a lot of everything else.

“We have way too much commodity office,” The Meridian Group Chief Investment Officer Gary Block said last week at Bisnow’s Fairfax State of the Market event. “We need selective pruning of some of this zombie commodity office, which hurts Tysons.”

In a market that is oversaturated with older office buildings that are unlikely to ever be desirable to tenants again, there has been some progress toward repositioning the stock, panelists said onstage at Comstock’s newly delivered 1800 Reston Row Plaza.

But there’s still a long way to go for the Fairfax market to get to a healthy place.

The county's 88M SF of leasable office space has an overall vacancy rate of 23.5%, according to CBRE. The brokerage divides the market into three segments: trophy, Class-A and Class-B/C.

The Class-A segment, with an average building age of 30 years, makes up more than two-thirds of total inventory and has the highest vacancy rate at 26.2%, according to CBRE. The trophy segment has a vacancy rate of 19.5%, which includes new spec buildings that have yet to land tenants but developers say are seeing more touring activity. 

“We've seen that flight to quality. I mean, it's really binary,” said Luke Koczela, director of residential at BXP, the owner of Reston Town Center. “You either have it or you don't.”

Efforts are underway to repurpose the older building stock — taking it out of the obsolete bucket, transferring it to more productive and economically beneficial uses. 

“The bottom of the market are made up of 30-, 40-year-old buildings that the highest and best use probably is not office today, and they're looking at alternative uses and optionality,” Cushman & Wakefield Managing Director Scott Goldberg said. “So a lot of that is getting taken out.” 

SCG Development is building 456 affordable units on the site of an office building it demolished near the McLean Metro station, while preserving the 482-space parking garage.

“We studied it. We took it through rezoning. We ultimately took the front building down,” SCG Development President Stephen Wilson said at the event.

The project’s 231-unit first phase is set to deliver in the spring of 2026 and the 225-unit second phase in the fall of 2026, Wilson said at the event. The units will be reserved for residents making 60% or less of the area median income.

In Herndon, BXP is demolishing two vacant office buildings on Worldgate Drive. In its place, the REIT is constructing 359 multifamily units and selling about a third of the site for townhome development. Just over 460 units are planned in total.

Koczela said the project works because the developer is preserving the parking deck, but other similar deals remain challenging to find.

“In terms of new opportunities where you're not the existing owner, it's very difficult to make those work, and we'd love to find more opportunities, but they're difficult, they're hard,” he said.

Other projects underway in the county include Time Equities’ proposal to replace the High Ridge office building just outside Fairfax City with an up to 400-unit residential building, Conifer Realty’s affordable conversion of a former Inova Health System office building at 2290 Telestar Court and Peterson Cos.’ 706-unit proposal at the Fair Oaks Business Park.

Fairfax County Economic Development Authority President and CEO Victor Hoskins said the county has also seen office parks successfully converted into industrial and manufacturing uses like 3D printing, space propulsion manufacturing and rapid prototyping centers for the military.

“What surprised me is how creative they're becoming with using these spaces,”  he said. “They really come in with the attitude of ‘Look, the pricing is right. How do we fix it for our opportunity?’”