Return to Virginia Business - February 2004

Alexandria: A nice place, with space

by Brett Lieberman
For Virginia Business
February 2004

In its day, Alexandria’s Potomac Yard was the East Coast’s largest rail center, a noisy hub jammed with thousands of cars carrying textiles, coal and other raw materials to Northeast factories. Today, though, the trains and tracks are gone, replaced by rows of SUVs and minivans lined up in front of newly built big-box stores.

The transformation of this 300-acre site isn’t complete. Still to come is 1.9 million square feet of office space, a 625-room hotel and nearly 2,000 condominiums and townhouses. When finished, the project has the potential to pump $17 million a year in tax revenue into the city’s coffers.

No doubt Potomac Yard is an easy site to market, with its panoramic views of Washington, D.C., across the Potomac River and proximity to major highways, public transit and historic Old Town Alexandria. “We’re in the middle of where everybody wants to be,” says Dan Kohlhepp, regional vice president for Crescent Resources LLC, developer of the Potomac Yard site.

But location has always been the driving force behind Alexandria’s economy. “Our company has been located in Alexandria for over 37 years,” says Vince Kelly, President and CEO of Metrocall Wireless. “The proximity to many of our government and corporate clients offers us the ability to keep our customer relationships close and personal. And our financial center partners can take the shuttle into Reagan National and be at our headquarters 15 minutes later.” Location is the key reason for the city’s emergence as a hot market. Today Alexandria is capitalizing on two massive redevelopment projects that seem certain to transform its future as they unfold in the next few years.

Besides Potomac Yard, a second massive redevelopment project is under way on the city’s southern boundary along the Eisenhower Avenue corridor, a 500-acre site that used to be mostly out-of-use industrial sites. Today it’s home to the new U.S. Patent and Trademark Office headquarters. Employees began moving into the new headquarters late last year. When the project is completed next spring it will have 2.4 million square feet of class A office space and room enough for the PTO’s 7,100 workers.

Both projects are attracting businesses and residential projects, even though they are years away from completion. The Potomac Yard site, for example, has already benefited the city, with existing retail stores generating about $2 million in tax revenues annually. Many residents were less than thrilled by the big-box stores. Still, city leaders are only too willing to do a little chest thumping. “Businesses and others want to be in Alexandria because it’s the only urban environment in Northern Virginia. We have the waterfront, we have access to the Woodrow Wilson Bridge and the Beltway, we’re five minutes to National Airport, 10 minutes to downtown Washington, we have mass transit and it’s a historic town and a safe town,” says Mayor William D. Euille.

The fact that Alexandria claims two of the region’s largest private developments belies its struggle to come to grips with development. “You have a lot of people in this city who think development is a four-letter word,” says Tom Welsh, president of the Potomac West Business Association. City leaders, developers, community groups and planners have often been at odds over how to grow the city without losing the small town charm and historic qualities that attracted many people in the first place. That go-slow approach has often resulted in no development or a mish-mash that ends up pleasing nobody.

The existing strip mall at Potomac Yard, which includes a Best Buy, Target and grocery store, underscores the city’s struggle to define itself. Community leaders spent much of the past decade trying to decide what they wanted to see at the Potomac Yard site. At one point the late Jack Kent Cooke, owner of the Washington Redskins, proposed a new stadium on the property, but community opposition over traffic and the fiscal impact on the city killed that project.
But consensus on what the city should do was hard to find and, as a result, the first phase of development at Potomac Yard was a hodgepodge, with the strip mall, a 100,000-square-foot warehouse owned by the Drug Enforcement Agency and a parking lot used by Avis Rent a Car. The city finally came up with a master plan for the yard in 1999 that includes details down to street widths and the type of street lights that should be used.

Community leaders realize the city can be an arduous place to develop. “People move into Alexandria, in particular Old Town, because of its historic ambience. It’s natural that they don’t want a Wal-Mart going in next door,” says Mark Begly, admissions director at Regent University’s Washington campus in Alexandria and president of the King Street Metro Enterprise Team. The pressure is made more intense by the relatively limited amount of space, despite the large open tracts at Potomac Yard and Eisenhower corridor. With a population of 137,000, the city has less than one square mile of undeveloped space and expects to be fully developed in less than 10 years.

It hasn’t always used its open space wisely. Unlike Arlington, which is renowned for its high-density development around Metro stations, Alexandria’s love-hate relationship with development has meant little high-density development around the city’s Metro stations. City planners may change that around the Braddock Road Metro station, where more commercial development is needed.

Alexandria is also having to reinvent itself in the face of new competition from areas such as Reston Town Center as well as the Clarendon, Ballston neighborhoods in Arlington and in Bethesda, Md., which are attracting the twenty-something crowd to bars and restaurants. The solution may lie in new development around Old Town, long the city’s preeminent attraction, and cozy eclectic neighborhoods such as Del Ray, which are proving popular among young couples and families.

It is the four-mile-long Eisenhower corridor, though, that holds the most promise for the city’s economic growth. Once owned by Norfolk Southern, the site parallels the Capital Beltway and has a Metrorail line running through it. Its cornerstone is the five-building, U-shaped Patent and Trademark Office project, which is projected to generate $6.5 million a year in tax revenue just from its 20-year lease.

Meanwhile, other development projects are in the works nearby. Additional office, townhouses, luxury condos, a Whole Foods store and a 315-room hotel are being developed. Atlanta-based Regent Partners plans to break ground this spring on the hotel and on 103,000 square feet of condos that will sit atop the store. The hotel will sit across the street from the PTO and be a short walk from the Albert V. Bryan federal courthouse. “We feel like this location is like the donut hole. Right in the middle of everything,” says Reid Freeman, executive vice president of Regent Partners.

The influx of new workers and residences will stress area streets, but planners say mass transit subsidies that federal government workers receive and a new concourse extending from the King Street Metro station under Duke Street to the PTO offices will help minimize the volume of cars on the road. PTO studies found at least 44 percent of its work force uses Metro. Two parking garages will add 3,500 parking spaces to accommodate drivers who will have access to three nearby Beltway exits, U.S. 1 and I-395. What’s more, the area currently includes 3,000 residences, but the population is expected to grow by 10,000 people by 2008 as the number of residential addresses doubles.

Economic development leaders who are trying to woo retail businesses and restaurants to serve their needs have mailed brochures on the project to 1,200 retail real estate brokers. “It would be nice to have some more drugstores, card shops and barber shops, but everybody knows it’s coming,” says Marvin Spivak, managing partner at the intellectual property law firm of Oblon, Spivak, McClelland, Maier & Neustadt, which for 13 years in a row has been first in the nation in the number of U.S. patents awarded. A year ago the firm leased new office space near the PTO site, and has seen some unforeseen benefits: Support staff turnover is down and morale is up sharply, says Spivak. “It’s just a really nice atmosphere to work in. I can see the George Washington Parkway, the Masonic Temple from my office. The views are amazing.”

City planners want to make sure the Eisenhower corridor doesn’t become an office park that closes down after working hours. They hope to attract retailers, businesses and especially restaurants that can carry over to beyond 5 p.m. to create a place where residents and workers can spend their money rather than going somewhere else. Their efforts include trying to attract arts groups and possibly a theater or concert venue. “We’re looking to make this area a seven-day-a-week, 16 hours-a-day active, mixed-use area,” says Sharon Hodges, executive director of the Eisenhower Partnership, an economic development group promoting the area.

Meanwhile, Potomac Yard has already had some success at attracting young professionals. The Reserve at Potomac Yard, a luxury apartment complex that features a billiards room and fitness center along with nine-foot ceilings and crown molding, is attracting young professionals drawn to the $1,195 to $2,000 per month rentals and the proximity to the District and Old Town. And Eakin Youngentob Associates Inc. and Elm Street Development will break ground later this year on Potomac Greens and Potomac Plaza, a 227-townhouse development just east of the rail lines of CSX. The project will also have 15,000 square feet of retail space on three acres north of the existing Old Town Greens and east of rail lines still used by CSX and Metro in Alexandria.

Alexandria will emerge from the current wave of development a very different place in many ways. The redevelopment of these two long-dormant industrial sites is going to bring in millions in revenue and thousands of jobs, which will continue to drive up demand for the new high-end residential developments. And, it will still have the history and urban charm of its Old Town. There’s nothing like being in the right place when the right time comes along.

Return to Virginia Business - February 2004