Passenger rail expected to change character of Tysons Corner

by Paula C. Squires
for Virginia Business
September 2006

One of the state’s most significant commercial hubs is poised for change with the expected arrival of passenger rail service. Already home to government contractors, technology companies and corporate clients, Tysons Corner offers more than 22 million square feet of office space — the country’s 14th largest office market.

In addition, it offers a million square feet of industrial flex space and 5.3 million square feet of retail. Yet its mix is expected to change with the first phase of the Metrorail extension to nearby Washington Dulles International Airport, which is scheduled to break ground this December. By 2011, Tysons Corner should be home to four or five Metro stations.

In response, developers are proposing projects that would create a live-work community around the center. Residential amenities such as grocery stores are planned along with other buildings that could easily be accessed on foot. “Metrorail is going to be extremely positive. It will help keep property values up for the residences already at Tysons Corner, and it’s needed because right now the traffic is gridlock,” says Tonya Ginter, director of research for the Washington, D.C., metropolitan office of real estate firm GVA Advantis.

One of the area’s largest private developers, Bethesda-based Lerner Enterprises, plans to break ground next summer on an 18-story, 472,000-square-foot office tower in Tysons II, across the street from Tysons Corner. With an outdoor courtyard and concierge service, the project will conform to “green” building standards and emphasize the synergy of living, working and shopping at one place.

At present, no new construction is under way at Tysons Corner. Instead, there’s an abundance of leasable space — 2.3 million square feet at the end of the second quarter, according to GVA Advantis. The vacancy rate is 10.5 percent, although the absorption of space leased vs. space vacated over the same time period has helped reduce vacancies, which peaked in 2000 after the dot-com bust.

More of the area’s defense contractors are starting to show interest in having a Northern Virginia address. Some are leaving Washington in search of buildings that can meet new security requirements, such as setbacks from the street. “We are seeing more defense contractors. … If that continues, I think we’ll see leases on some pretty big blocks of space,” says Ginter. Earlier this year, Northrop Grumman leased 129,204 square feet at Tysons Corner for the administration of a CIA contract.

The commercial center also is getting a boost from new and renewed leases from small- to medium-size companies. By mid-2006, average rent rates for Class A and Class B buildings had climbed to $27.14 per square foot, up from $23.50 per square foot at the end of 2004 — a sign that the market is picking up.