Tysons Corner
- RBA: 30,259,633 SF
- Vacancy Rate: 15.1%
- 12 Month Net Absorption: 560,000 SF
- Average Asking Rent: $35.88
- 12 Month Rent Growth: 4.2%
Tysons Corner is behind only the East End and CBD in terms of asset value and total inventory and despite vacancy levels that are above the metro average, the submarket continues to post rent growth that far surpasses the 10-year average and which even rivals the submarkets surrounding Amazon’s HQ2. It has been nearly a decade since the Fairfax County Board of Supervisors adopted a new comprehensive plan for the area that led to a combination public infrastructure projects and private development that shows no signs of slowing down. The delivery of the Silver Line in 2014 transformed the suburban, commuter submarket; connecting it to the rest of the region and spurring a flurry of transit-oriented, mixed-use development that should continue to drive demand.
Tysons Corner’s vacancy rate and rent growth metrics seem contradictory but upon closer examination provide evidence of the real story going on in the submarket. The market rent in Tysons Corner is nearly $36.00/SF; however, this again only tells part of the story. The submarket’s aging inventory is largely to blame. 3-Star properties, which comprise 1/3 of total inventory, have a vacancy rate of 16.7% and an average rent of $27.31/SF (1.6% higher and $8.57/SF lower than the submarket averages). On the other hand, 4 & 5-Star properties have an average rent of $40.52/SF with new projects commanding even higher rates. In fact, properties built since 2015 have average rents just shy of $50.00/SF. Development, both commercial and residential, will continue to focus around the submarket’s four metro stations as will demand; resulting in a type of “locational” obsolescence for a significant number of properties.
This flight-to-quality trend has mitigated supply-side pressure on submarket fundamentals. New developments like the Boro have experienced strong pre-leasing and despite 582,000 SF delivering in the past 12 months, vacancy levels decreased by 0.4%. There are no projects currently under construction, but Tysons’ proposed development pipeline is staggering. Of the more than two dozen projects, Clemente Development’s View at Tysons is of particular interest. The proposed 40-story, 600-foot tall, 3,000,000 SF office building will be located near the Spring Hill Metro station; an area that has not seen the same level of interest as its counterparts. Another sign of things to come is the assemblage of more than seven acres on Tyco Rd by the Georgelas Group, which is in addition to the 7,500,000 of developable square footage already assembled.
One final, notable piece of news is the Hanover Company’s purchase of 1500 Westbranch Dr with plans to develop up to 420 residential units with ground-level retail. This may be a sign of things to come as developers repurpose or redeveloper older, high-vacancy office properties into residential uses, and could be the solution to the submarket’s vacancy issues.
Reston
- RBA: 20,669,006 SF
- Vacancy Rate: 13.2%
- 12 Month Net Absorption: (229,000 SF)
- Average Asking Rent: $33.66
- 12 Month Rent Growth: 0.3%
Like Tysons Corner, Reston’s future has been forever changed by the delivery of the Silver Line metro and similar trends are shaping submarket fundamentals. Demand, driven by proximity to public transit, and measured development have caused vacancy levels to fall below the submarket’s historical average. The most recent, notable delivery was Comstock Company’s 5-Star, 368,000 SF office building at Reston Metro station. Google signed a 164,000 SF lease there in the 2nd quarter of this year; prompting Comstock to break ground on phases two and three early this year. The two buildings will add an additional 446,000 SF to the site and are expected to deliver in mid-2020.
Boston Properties, the largest landlord in the submarket, continues to prosper with Fannie Mae taking 850,000 SF at Reston Gateway (under construction) and Leidos relocating its headquarters by consolidating into 287,000 SF at 17Fifty (delivering in 2020).
Rent growth in Reston since 2016 has been nearly 8%, but like Tysons Corner, this belies the true state of the submarket. The average rate for 4 & 5-Star properties is $38.00/SF; however, Reston Town Center commands rents more than 20% higher and Comstock’s Reston Station has rents in the $51.00-$52.00/SF range. New development, centering around existing and future metro stations, should continue to dominate demand. As a result, the submarket should continue to see a flight-to-quality and widening gap in fundamentals between 4 & 5-Star properties and 3 and 1 & 2-Star properties.
