“I’m the Juggernaut, @#$%&!”
RBA: 30,096,814 SF
Vacancy Rate: 14.4%
12 Month Net Absorption: 1,400,000 SF
Average Asking Rent: $35.41
12 Month Rent Growth: 3.8%
Tysons Corner is numero uno (sorry, Reston). This “edge city” is Fairfax County’s (and arguably Northern Virginia’s) central business district and a regional commercial center; boasting the largest concentration of office space in Virginia and 3rd in the DMV behind only DC’s East End and CBD submarkets. Many of the nation’s largest companies have their corporate headquarters in Tysons Corner; including Booz Allen Hamilton, Capital One, Freddie Mac, and Hilton Worldwide. The submarket is also home to two super-regional malls, Tysons Corner Center and Tysons Galleria, the former being the largest shopping mall in both the Commonwealth and Baltimore-Washington area. With over 115,000 office and retail workers, Tysons Corner is the 12th largest employment center in the United States. In short, Tysons Corner is a veritable juggernaut.
The delivery of the Silver Line in 2014 brought 4 metro stations to the submarket, which increased density based on proximity to the metro and spurred a flurry of development; delivering over 2,000,000 SF of office and nearly 3,000 multi-family units. The most significant new developments are Capital One’s new headquarters and Meridian’s Boro Tower. Strong demand has kept vacancy rates down, which are now at a 10-year low, and as a result rent growth has been strong at 3.8% over the past year.
Tysons is a tale of two cities or, perhaps more accurately, two tiers of office space. It seems odd that despite vacancy rates in the high teens rents have steadily and significantly risen since 2015. The answer lies in the breakdown of the rents and vacancy rates between 4 & 5 Star properties and 3 Star properties. The average rental rate in Tysons Corner is $35.41/SF/yr but is $39.97/SF/yr for 4 & 5 Star properties and $27.60/SF/yr for 3 Star properties. Along the same trend, the vacancy rate and net absorption for 4 & 5 Star properties is 16.8% and +35,335 this quarter and 20.4% and (61,850) for 3 Star properties. This flight to quality trend is most likely to continue; leaving many to wonder what to do with Tysons functionally obsolete office inventory.