An Oasis of Stability Amid a Downturn
Posted on Oct 18th, 2009
Served by five Metro subway stops within four miles, the corridor continues to attract new tenants, buyers and developers in the face of the deepest recession since the Great Depression. “It’s really an anomaly, considering the tough economy we’ve been in since December 2007,” said Sigrid G. Zialcita, managing research director for Cushman & Wakefield, a global real estate services firm.
The firm’s most recent figures for the corridor show vacancy rates of 8.6 percent for offices — compared with a national suburban rate of 18.3 percent — and 3.5 percent for retail space, the second lowest of 23 major markets surveyed, ranging from 3.3 percent in Washington to 27.5 percent in Orlando.
Office rents in the corridor are actually up slightly, but remain below those in Washington, across the Potomac River. “For comparable Class A space, we’re looking in the D.C. central business district at about $50 to the mid-$60s for trophy space,” Ms. Zialcita said. But in the Rosslyn-Ballston corridor, rents for Class A offices are $39 to $45 a square foot.
The 3.3-mile corridor extends from the high-rise riverside canyons of Rosslyn; through Courthouse, the seat of Arlington County’s government; to hip Clarendon; to Virginia Square with its branch campus of George Mason University; and finally to Ballston, a few square blocks of high-rise offices, hotels and residences and also a hub for science and technology.
“The Rosslyn-Ballston corridor will continue to be the most sought-after area in Northern Virginia in the foreseeable future,” Cushman & Wakefield said at the end of June. “It has remained resilient during the worst recession in decades, and should continue to do so, as demand will remain healthy and new supply will be low for the next few years.”
The positive economic vibe was evident this summer with the announcement that the Defense Advanced Research Projects Agency would move its 800 employees from older leased space nearby into a new 355,530-square-foot building designed to meet Defense Department antiterrorism standards.
The new Darpa building, slated to be completed in 2012, is part of a 1.2-million-square-foot mixed-use project called Founders Square. The developer is the Shooshan Company, which was already the dominant builder in Ballston. It previously built the Liberty Center, a one-million-square-foot mix of commercial, residential and retail space completed in March 2008.
“We just consistently have new development in what we call urban villages,” said Terry Holzheimer, Arlington County’s director of economic development, recalling that “we were a decaying urban corridor in the 1970s.” Since then, he said, “Arlington has been nothing but consistent in terms of adding buildings over time: 20 million square feet of office space and 20,000-plus housing units over a 25-year period.”
Government agencies and related contractors account for 60 percent of the leased office space in the corridor, Mr. Holzheimer said.
Arlington County’s 26 square miles were a part of the original District of Columbia, but were returned to Virginia in 1846. The transit-related development in the Rosslyn-Ballston corridor has won national recognition for smart growth that mixes offices, shops and living quarters close to subway stops. “We really worked on creating a sense of place, and on what kind of development we wanted near our Metro hubs,” said Barbara A. Favola, chairwoman of the county’s governing board.
Rosslyn was little more than a collection of pawn shops and auto repair shops until the 1960s, when new office buildings rose to accommodate government agencies forced to relocate after the razing of temporary buildings erected on the Mall during World War I. Those early Rosslyn high-rises are now gradually being replaced by office towers.
“The Rosslyn-Ballston corridor, with its immediate access to downtown Washington, D.C., is an ideal submarket for transit-oriented, mixed-use development,” said Brian P. Coulter, chief development officer of the JBG Companies, which has been a major developer in Rosslyn and is also active in Ballston.
While Wilson Boulevard, a main artery, helps define the corridor, the key element in its success has been the subway. Planners had wanted to place it in the median of Interstate 66, on a more northerly alignment. But Arlington officials fought to have it run underground in the corridor to spur development.
Among recent projects, the Wooster and Mercer Lofts condos, completed in 2007 with ceilings up to 18 feet high and the intentional look of restored industrial warehouses, are three blocks from both the Rosslyn and Courthouse Metro stations, and they are eight-tenths of a mile by foot across the Francis Scott Key Bridge to Georgetown. The developer, Jim Abdo, said that 95 percent of the 87 units in the two buildings had been sold, at prices ranging from $700,000 to $1.2 million.
Mr. Abdo said he intended to break ground within 12 months on another upscale condo project on an adjacent three-acre lot that he bought for $20 million and cleared of mid-20th-century garden apartments. It is to be called Gaslight Square and have 117 units ranging from $650,000 to $1.3 million.
“There’s a lot of tremendous economic fundamentals in place” in the corridor, Mr. Abdo said, “and a lot of positive growth in retail, restaurant and culture.”
A few Metro stops away, the developer John Shooshan has turned formerly somnolent Ballston into a high-rise, mixed-use area. “We’re just blessed to be in the right place, even at the wrong time,” he said. His Liberty Center complex is 100 percent leased, he said.
The National Science Foundation moved to Ballston in 1993, in the vanguard of many institutions.
These include Marymount University, whose business school is across the street from Virginia Tech’s planned expanded research center.
The Nature Conservancy, the Office of Naval Research, the Air Force Office of Scientific Research, the Army Research Office and Virginia Tech’s Advanced Research Institute, which is to move into the new center, are all part of the Ballston scene. The Ballston Common Mall provides retailing and the Kettler Capitals Iceplex, where hockey fans are admitted free to watch the Washington Capitals practice.
One Metro stop closer, Virginia Square, just blocks from Ballston, has George Mason’s Law School and School of Public Policy and the Federal Deposit Insurance Corporation.
Dan McCaffery, a Chicago developer, saw the corridor’s potential a decade ago when he bought land in Clarendon. Former owners had wanted to build a Home Depot, but citizens resisted.
Mr. McCaffery instead built Market Common, a mixed-use project that opened in 2001 and continues to thrive with two street-facing levels of high-end stores arranged in a horseshoe facing a long landscaped lawn, with apartments and offices above and adjacent. “It’s all self-contained,” Mr. McCaffery said. “There’s always a buzz.”
Whitlow’s on Wilson, a restaurant on Wilson Boulevard, is part of the buzz. Displaced by urban renewal in downtown Washington, it relocated to Clarendon in 1995. The owner, Greg Cahill, liked the small-town feel that he found.
The ambience is more urban these days. Now, he said, many places, including Whitlow’s, feature live music, and there is more of just about everything. “There are more people, more buildings, condos, apartments,” he said. “It’s a nice, safe place to come.”
--- Eugene L. Meyer, 10/6/09 The New York Times