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Driving development

Light rail in Norfolk and Tysons Corner attracts new projects

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Tom Johnson likes what he sees from the 17th floor windows of the Wells Fargo Center in downtown Norfolk.  From the city’s newest, 23-story high-rise, Johnson, a senior vice president for S.L. Nusbaum Realty Co., can see the MacArthur Center, the region’s most successful mall, with a million square feet of retail. And at the doorstep of the Wells Fargo building is The Tide, Norfolk’s new and fast-growing light-rail system.

It began operations last August at 11 stops along a 7.4-mile line. So far, ridership has exceeded expectations. The line expected to have about 2,900 riders per day when it opened, but as of mid-April it was averaging about 4,900 daily riders.
The local enthusiasm for The Tide is reflected in demand at the Wells Fargo Center, a $160 million, mixed-use project that S. L. Nusbaum developed and opened in 2010. The 121 apartments that opened last September are fully leased, says Johnson.  In addition, 50,000 square feet of retail space is more than half full, and the building’s 250,000 square feet of office space is 85 percent leased.

The most recent commercial tenant to sign is AECOM, an engineering, architecture and consulting firm. It’s moving the company’s Hampton Roads regional headquarters from Virginia Beach to the 15th floor of the Wells Fargo Center, leasing 25,000 square feet. The move, which will bring 110 employees downtown, represents the first time a company has opened a headquarters in downtown Norfolk since 1994, when Maersk Lines Ltd., a major shipping company, came.  “For them, the transit-oriented nature of the project was very important,” Johnson says.

While the light rail line isn’t the reason Nusbaum built the Wells Fargo Center, it is the reason for the building’s location. “We wanted to be near the rail line,” he says. “People want to live and work here. Downtown Norfolk is the central business district for the whole Hampton Roads region, and we have the leading tenants in the entire market,” he says.

Indeed, urban projects that can provide a live-work-play lifestyle are feeding the demand for transit projects.  Yet, urban transit is not cheap. The Tide cost about $318 million. Virginia’s other major transit project,  the extension of Metrorail through Tysons Corner in Fairfax County, has a price tag of around $2.6 billion. For both, the money comes from a mix of federal, state and local sources.

While expensive, transit projects like these are proving to be powerful drivers for commercial development. In Norfolk, the city attributes more than $500 million in development and rehabilitation projects since 2005 to transit. All along the Tide’s corridor are apartment projects, condominiums and mixed-use projects like the Wells Fargo Center. 

Transit development is coming to Tysons
That same pattern of development is occurring at the biggest transit project in the state at Tysons Corner. Construction is well under way on four new Metrorail stations that are scheduled to open next year. A massive new residential project, a 26-story apartment building called the Ascent, is going up on 1.6 acres near the Tysons West Metro station. When it’s finished in 2014, it will be the tallest building in Tysons, with 404 units. 

The timing is great for Charleston, S.C.–based developer Greystar and its joint venture partner, Prudential Real Estate Investors, because apartments are in demand, especially in Tysons. “There’s just a need for housing, and we’re excited to be the first transit-oriented project” under the county’s new development plan for the Tysons area, says Brandon Henry, Greystar’s managing director for development.

Tysons is already big, with more than 26 million square feet of office space. The county’s long-term plan allows for an additional 12 million square feet, creating room for up to 100,000 people to live. That means high-rise construction centered around the four new Metro stops. “It’s really now the true downtown of Fairfax, and Metro is a player in that,” Henry says.

The state’s best example of how transit can spur development is in Arlington County’s Rosslyn to Ballston corridor. New projects are still being done there, even though it’s been more than 30 years since the county’s five Metrorail stations opened along the Wilson Boulevard corridor. Herndon-based Crimson Partners and partner Bernstein Management Corp. plan to break ground this fall on a nine-story office and retail project that will cover an entire block between the Ballston and Virginia Square Metro stations. The building will have 200,000 square feet of space, and a 13,000-square-foot performing arts theater. It’s scheduled to open in early 2014.

The corridor has lost some tenants because of the Base Realignment and Closure (BRAC) process, but Crimson Partners thinks that’s a temporary problem. “The corridor has always been very desirable,” says Christian Chambers, a partner at Crimson Partners. The reason, he says, is the environment — shops, restaurants, theaters and public parks, in a pedestrian-friendly design. “Projects there don’t work just because of the Metro; they work because of quality office environments,” he says.

Chambers’ firm also is developing a five-story apartment building near the Ballston Metro station. That project, called The Crimson on Glebe, will break ground early next year and have 115 apartments with 9,000 square feet of ground-level retail. “Look at what’s going on around it — it’s [close] to Metro, it’s right next to a major mall and a Harris Teeter store and has great access to highways. It’s got all of the attributes of a good transit-oriented development,” he says.
Transit projects almost always require a huge public investment, and supporters of the projects have to convince skeptics that the money is well spent. Their argument is that transit projects create way more tax revenue than typical car-dependent development patterns. In Arlington, for example, the Ballston-to-Rosslyn corridor equals 11 percent of the county’s total land, but it has nearly half of the county’s assessed land value, according to county planners. “Transit has shown that it is an amazing economic development tool,” says Stewart Schwartz, executive director of the Coalition for Smarter Growth.

Still, the rail projects in both Norfolk and Fairfax face financial hurdles. Funding is uncertain for the $6 billion second phase of the Metrorail extension, which would add six more stations and take it to Washington Dulles International Airport in Loudoun County. The Virginia General Assembly did not include $300 million in bond funding for the project, as supporters had hoped. And now Loudoun County is considering pulling its funding support for the project, which could potentially kill it.

Plus, development of the new transit-oriented Tysons is uncertain. In late April, plans for developing Spring Hill Station — a 28-acre site around the Tysons West Metro station — hit a snag. The Georgelas Group, which is developing a high-rise project there, the first under Tysons’ new zoning, didn’t exercise its option to buy seven acres around the new station from another property owner, according to a Washington Post article. So for now it’s not clear who the major players will be, although the land is zoned for high-density mixed use.

In Hampton Roads, Virginia Beach is considering extending the Tide within its borders. The City Council has agreed to hold a referendum on the issue in the November elections. The outcome is purely advisory — the final decision is up to the council.

Extending light rail to Virginia Beach’s Town Center area would cost $254 million, and taking it to the oceanfront would cost about $807 million, according to a consultant for Hampton Roads Transit. One supporter is Scott Adams, managing director of the CBRE office in Hampton Roads. He’s optimistic the extension will happen, in part because Norfolk’s experience has worked so well. “I think it’s still very, very early” in gauging its impact, he says. “But it’s perceived as a huge positive.”

According to the Chicago-based Center for Transit-Oriented Development, there are 4,000 transit stations in the U.S today. It says the potential for the transit-oriented development market is so big that the nonprofit is compiling a data base to track demographic and land-use data for the half-mile radius around each station.

Ideally, Adams says, the rail line could someday extend through the region to some of its key destinations, such as Norfolk International Airport and Naval Air Station Oceana. “It’s been done in a first-class manner and put Norfolk in a very positive light,” he says. “We hope other cities will follow.” 

Interiors: Office of Alex Nyerges, Director, Virginia Museum of Fine Arts, Richmond

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