Lerner Aims to Complete Tysons Office Tower… Only Two Years Late

tysons_tower

Artist’s rendering of Lerner’s new Tysons Tower. Original completion date: early 2014. New completion date: Late 2015/early 2016.

by James A. Bacon

Well, well, well, what do you know? The commercial building boom in Tysons triggered by the imminent completion of Phase One of the Rail-to-Dulles project doesn’t seem to be running on schedule. A Washington Post article today highlights Lerner Enterprise’s lengthy delay in building an 18-story, 476,000-square-foot office building near one of Tysons’ four Metro stations. Writes Jonathan O’Connell:

Office leasing has been flat, at best, in most parts of the region since then. The vacancy rate at office buildings in Northern Virginia is more than 17 percent, and other buildings built without tenants lined up are still largely empty. And the Silver Line has been delayed.

The good news is that Lerner is finally ready to move; it expects to complete construction by late 2015 or early 2016. But the question is how rapidly the Tysons commercial market can absorb (a) existing vacancies, (b) Tysons Tower, a Macerich project nearing completion, and (c) the Lerner office space, in a regional economy driven by federal spending in an era when federal spending, especially the defense spending so predominant in Northern Virginia, is severely curtailed and as businesses continue to shrink their office footprint per employee. Rob Whitfield, a former commercial real estate broker and a Rail-to-Dulles gadfly, estimates that Northern Virginia could have an eight-year office supply at present.

The multibillion-dollar long-term plan for transforming Tysons from a poster child for autocentric sprawl into a walkable, transit-oriented community has more interlocking pieces than a Chinese puzzle. The plan depends heavily upon an increase in development around Tysons to stimulate Silver Line ridership, pay for the reconfiguration of the business district’s paisley street pattern into a walkable grid, and generate tax revenues to offset the billions of dollars of road and highway improvements needed to move traffic in and out of the district.

If the development is slow to materialize, then the money to pay for the supporting transportation and streetscape upgrades will be slow to materialize. The question is, what happens if the anticipated smart-growth amenities aren’t built? Will Silver Line revenue fall short? If it does, who will pay? Will businesses find the district less attractive and locate in more walkable places, like Arlington, instead?

At least Tysons partisans can console themselves about one thing. Reston, a prime competing market on the Silver Line, turns out to have massive financial obligations of its own. The Reston Citizen Association estimates that Reston’s infrastructure needs to be $1.5 billion in current dollars ($2.5 billion in future dollars). Meeting those obligations could drive up Reston leases and rents.

The Silver Line is being built — that die has been cast, and there is no going back — so it only makes sense to use the Metro as a stimulus for more rational land use in Tysons and along the Dulles corridor. Tysons stakeholders are doing what the logic of the situation impels them to do. I’m just worried that the cost of the transformation — Silver Line subsidies, transportation access in and out of Tysons, and other infrastructure — is so huge that it can’t be paid for and the whole thing will disintegrate in slo-mo. I hope my fears are overblown. Somebody please tell me why I’m wrong.

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11 responses to “Lerner Aims to Complete Tysons Office Tower… Only Two Years Late

  1. A lot of the commercial development in Tysons will house existing area tenants moving to, or consolidating in, new buildings. That will, of course, result in other vacancies. The only big capture has been Intelsat, which has no existing Tysons’ presence.

    Over time, Tysons has grown at about a million square feet per year. Sometimes, there are booms and others busts. But the average is 1 million. Whether that changes is the big question.

  2. There 10 high rises being deliver this year or beginning construction this year, more construction by SqFt than at anytime in Arlington ever.

    This one project didn’t move forward last year because Lerner was afraid the market wouldn’t support it.

    What is missing from this story is that Macerich’s tower is already over 65% leased. Lerner’s delayed hurt his property because had he moved, like Macerich, he would now be playing with house money (as Macerich with 65% occupancy is).

    More importantly, LMI moved forward with their project. Mitre is expanding already. Capital One is increasing the size of their already approved rezoning because their company has grown faster than they expected and they need a taller building now. Beyond this, we have 6 residential buildings coming online or beginning construction (Ascent, Ovation, Garfield parcel, Vita, Spring Hill Bldg 2, and Tysons West). The residential is the important part to Tysons redevelopment, not the office, and so far its been mostly green lights.

    So, I am someone telling you, you are wrong.

    • And my god, I need to write all of my future comments out, and review them, because whenever I write one and return I see how unbelievably illegible they are. Edit button would be the greatest present ever 😀

    • It will be interesting to see whether the growth in commercial leases breaks out of the historical average to a new and higher rate after the arrival of the Silver Line. The decision of Intelsat to come to Tysons was a big breakthrough in my opinion.

      Residential sales and leases will be very interesting to watch. Clearly the landowners think residential will be successful. And growth there is important to overall success.

      Another thing to watch is the reaction to popup retail. I think that can be a good addition to early, urban Tysons.

  3. Down our way… we have many empty retail and commercial buildings.. and marginal operations in others…

    it’s bee a while.. and I’m wondering if we are seeing something fundamental.

    • “it’s bee a while.. and I’m wondering if we are seeing something fundamental.”

      We’re seeing a few fundamental things.

      1. Fundamentally, electing a president with no practical experience in managing anything is a mistake. Elections have consequences. One consequence of Obama is economic stagnation without end.

      2. The Feds are spending less overall because the Republicans forced it. Obama is doing his best to expand or at least maintain entitlements. What gets cut? Discretionary spending. And it’s discretionary spending that fuels Virginia. Not just Northern Virginia. Not just Northern Virginia and Tidewater. All Virginia. We’ll see what happens to Richmond when the state government needs to start shrinking because the river of Federal money is no longer at flood stage.

      3. America has more labor available than there are jobs. It really is just that simple. I laugh when people say robots will someday take over human jobs. I see it every day. Where have all the telephone operators gone? Software based robots interpret human voice and provide the number requested by the caller. Where have all the people movers to and from the C Concourse at Dulles gone? They and their legions of drivers have been replaced with a robot train that needs no human beings to pilot it. Where have all the gate agents gone? They’ve been replaced by robots in the form of kiosks that read your credit card and spit out airline tickets … just like the small armies of gate agents used to do ten years ago. In systems people used to talk about 1 admin per 60 servers. Better tools made it 100. Facebook is rumored to be at 150. Microsoft says it can run 1000 servers with one admin. Will we soon see 1 admin per data center?

      The middle class in America only exists so long as there is more demand for American labor than there is a supply of American labor.

      That equation no longer holds.

      • You lose all credibility when you talk about economic recovery and mention the president.

        #3 is the actual reason (soon to come to the fast food sector with touch screens replacing 90% of workers).

        #1 is your political bias

        #2 is ironic because see #1, by this sentiment #1 should simply replace the subject from unexperienced president to unexperienced teaparty 2010 wave of congress

        And is it possible to have any discussion of anything in the world anymore without an ad nauseam rehash of everyone’s political views. Repeat after me, what happens at the local level has nothing to do with national politics.

        You can blame all the national level programs you want, ultimately where there are educated people we have unemployment similar to the boom during Clinton, where there are uneducated people we see a deep and lagging recession. To me, that means that those uneducated areas failed locally to improve the lives of their residents.

  4. re: what the POTUS can do…to “create” jobs…

    like what?

    tell me what this guy did:

    You want Bush to come back and tell Obama what to do?

    Jesus.

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