Three Land Use Trends to Watch

Construction booming in Tysons despite 17.5% office vacancy rate.

Three articles today may help us divine the future of residential and commercial development in Virginia:

Rebound of the exurbs? For many years, I was committed to the proposition that metropolitan development had reached a tipping point in which the forces favorable to urban re-development were stronger than the forces driving suburban sprawl. The exurbs — low-density tract development on the metropolitan fringe — seemed to be in full retreat as market preferences shifted toward walkable, mixed-use development in central cities and inner suburbs.

There still seems to be an unfulfilled demand for walkable urbanism, but I may have been to quick to write off the exurbs. Jonathan Fox, a principle at the Fox Group, argues in the Washington Post that median home prices in Washington’s inner suburbs flat-lined in 2016 while prices in outlying communities such as Marshall, Warrenton, Lorton and Middleburg have experienced double-digit increases in median home prices and strong gains in cost per square foot.

“As home prices and the cost of living continue to increase in Washington,” writes Fox by way of explanation, “there will be more demand for affordable housing which is often found in farther out regions of the counties.

My question for Fox: Is he focusing on real estate prices in the oases of small-town walkability in outlying communities — Warrenton, for instance, is highly walkable — or does his analysis include the surrounding tract development? If so, are walkable communities out-performing tract communities?

Tysons redevelopment is booming. But… The Tysons area may have a 17.5% office-vacancy rate, but re-development is going gangbusters. Traditional supply-and-demand logic does not seem to apply, says Gerald Gordon, president of the Fairfax County Economic Development Authority, as reported by Inside Nova.

Tysons tenants are engaged in a “flight to quality,” moving from older buildings to new ones with the latest amenities. “The new space is more expensive, but it sits right on top of a Metro station,” Gordon said.

But redevelopment away from the Metro stops may prove a challenge. “We’re going to have to work hard just to stay in place,” Gordon said. “When I first got here, office users were taking an average of 265 square feet per employee. Today, it’s anywhere between 80 and 140. So you have to bring in twice as many jobs to fill the same space.”

Moral: As employers figure out how to use less office space — more collaborative space, more mobile office technology, more “hoteling” — high commercial vacancy rates will continue to be an issue. There will be a lot of obsolete office space on the market.

Bifurcation of retail. Everyone knows that Amazon.com and other online retailers are gutting the traditional retail industry. But that doesn’t mean everything will be purchased online. People still like to shop as part of an entertainment or social experience. My wife’s cousin calls it “retail therapy.” A related phenomenon is what I call “girlfriend shopping” — shopping as a bonding experience. While Amazon.com makes shopping ridiculously easy, it’s not what you’d call an enjoyable experience.

Tom Goodwin, head of innovation for Zenith Media, argues in Bloomberg that physical retailers can create a competitive advantage that trumps price and convenience.

“Shopping is the world of adding experiences,” he writes. “It’s the interactive perfume lab in Selfridge’s, the selfie opportunities in Harvey Nichols, the Hardware club experiences in Harrod’s or the extravagant laboratories of Le Labo. Coffee shops seem to have learned this, it’s the unnecessarily long wait, the drama of the brew, the theatre of the leather bound menu in Intelligensia coffee.”

Market forces will push retailers in one of two directions — more frictionless, low-cost shopping online or more experience-rich shopping in the physical world.

Bacon’s bottom line: I don’t get the sense that local governments in Virginia have absorbed two important lessons. First, technology has rendered obsolete the space-intensive offices of yesteryear, and the demand for commercial space is shrinking. Old office parks will rapidly lose their market appeal. Counties will see their tax bases shrivel. Second, retail activity continues to move moving online, which is rendering shopping centers obsolete and redundant. Again, counties will see their tax bases shrivel.

The future belongs to those who can adapt. Office activity will shift to centers of walkable urbanism; access to mass transit is a major bonus (although, in an Uberized world, I’m not persuaded it is absolutely essential). Retail activity likely will do the same. When people want to enjoy shopping as an experience, they want to enjoy the experience outside the store as well. Strip shopping centers and aging malls don’t have much to offer.

Nobody knows where all this heading. (That includes your humble futurist and prognosticator). Things are changing too fast for planners and politicians to figure it out. How will self-driving cars alter the equation? How will Transportation-as-a-Service change the way think about where they live, work and play? There’s lots of speculation, but nobody knows. We won’t know until the market figures it out. The communities that prosper will be those that are the most flexible, adaptable and willing to experiment with new forms of transportation and land use.

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7 responses to “Three Land Use Trends to Watch

  1. One thing to pay attention to in the online vs retail world is WalMart.

    Amazon is working hard to build as many “fullfillment” centers as they can so they can “deliver” while WalMart has a de-facto existing network of distribution centers and stores and is working furiously to build their own online competitor to Amazon.

    I would not count Walmart out – in the longer run. I note our local WalMarts NOW allow online ordering of groceries to complement their “site-to-store” delivers, as well as in-store banking and pharmacy.. Why oogle over Amazon “free shipping” when you can just add that item to the grocery store trip?

    In terms of Exurbs – the name of the game is “the commute” and we’re in the midst of game-changes… with the advent of congestion-tolls instead of building or expanding roads.. stay tuned for what happens to the DC/MD/VA MSA.

    Finally – what will Millennials do? Will they stay inside the beltways or will they also join commuter purgatory to the exurbs? The exurbs – at least the ones where I live – give short shrift to things like walkability.. not only do they not like bike/ped trails – they are generally opposed to things like sidewalks in the subdivisions which are also cul-de-saced rather than street gridded – i.e. they have one entrance on the main road.. which is the way a lot of Nova is also.. but NOVA does like greenways, bike lanes and trails, etc.

  2. Jim – the point driving this in the locales discussed is ROAD TRAFFIC to work, shopping, and/or raising family right or having fun, and the option of varies ways to beat that issue. That central question drives most all the three examples you cite.

    Example – a plumber with business in Landover Md at Rt. 50 and Capital beltway suddenly has better market in Easton Md. than Springfield Va. The former is an easy and very reliable 60 minute drive, the latter now is a very unreliable hour to 3 hour drive.

    If that plumber moves to Annapolis, suddenly he’s got a new world of opportunities he can open up, under-served and easy to reach markets and amenities in all directions, all within half hour at most, including new customers galore plus schools, recreation, shopping minutes away.

  3. It will be, as it always is, a tale of two Commonwealths. Well-managed localities such as Loudoun, Henrico, Ablemarle, etc. will adapt and work harder at “placemaking” which is really what walkable urbanism is. The most important pieces in a Community Development Department will be designers/architects. They will be essential in placemaking.

    As to “retail”…I think this will just be another manifestation of class divide. I agree with you, “retail” has become an experience. So, if you have money to blow on some shopping, drinks, coffee, a meal on a Saturday….you’re exactly what developers want. And I think we’ll end up seeing wealthier areas with much more retail than poorer areas. There simply won’t be the demand in poorer areas for the “experience.”

    Another trend worth watching will be the flip side of your office example: residential. Employers are looking for less square footage. Are homeowners?

  4. What becomes an untenable driving/time distance for one distant plumber or other service/trade/retail becomes an opportunity for another willing to locate close to where that market is or put a satellite/franchise operation.

    There’s a certain irony to it like here in Fredericksburg where plumbers in Woodbridge find it just as easy (and profitable) to drive 30 miles south to Spotsylvania for jobs than to try to drive 30 miles North towards NoVa/DC for work.

    Walmart… McDonalds.. Subway.. have this figured out.. in terms of Demographics and drive time.. when the numbers “align” they build a new store!!

    FedEx, UPS, USPS, ditto.. they site the facilities according to service areas – which are defined by time and distance..

    They days of VDOT building more roads is winding down. Major urban commute roads will be congestion-tolled. New regional roads will be fewer and fewer as the right-of-way will become more and more developed and harder and more expensive to obtain. If you want to drive at rush hour.., it’s going to cost you – time and/or money.. and people will have to fold that into their economic decision calculations and probably should.. “all you can drive whenever you want” is going away.

    What we WILL see is strategic “connectors” where they can be done physically and fiscally… .. more computer-controlled signalization… on wider-scope, network basis.. more round-abouts, more bottleneck fixes, more converted diverging diamond interchanges, etc.

  5. Welcome to Tysons, America’s Next Great City. Well, that’s what those new signs leading into and out of what was once Tyson’s Corner say. I agree with Jim. The empty space / building boom dichotomy leaves one wondering what is going on. In cities older structures are “re-purposed” to newer uses. There are a lot of old churches in Chicago functioning as condo units these days. What do you do with an old office building?

    Two beats behind the music. Jim Bacon is rushing headlong into 2010 with his “work from home” theory. In fact, the trend is the opposite. Colocation, work from work. Etc. Back when I was in the start-up technology world I always thought it was interesting how crowded the offices of most start ups were. Packed into office-less lofts the start-up employees worked cheek to jowl until all hours of the night. Where was the work from home attitude for those companies? Nope, the back to the office trend is in full swing.

    As for LarrytheG’s theory that Henrico is a well run county – really? It’s strip malls, highways, etc give it a distinctly Fairfax feel. The schools are struggling. There seems to be a constant simmering level of racial tension. I don’t think it’s any worse than Fairfax but I don’t see a well oiled machine. Everything in Loudoun is new so that helps. If you want to see a county that made progress – look toward Arlington, in my opinion. They are largely snowflakes but they took a decaying place and made it pretty vibrant.

    • Well said. But the flat prices Jim mentions in the DC urban markets also reflect the additional factor of Metro Dysfunction. I keep meeting folks who have made/are making relocation decisions on the assumption that there’s no practical alternative to commute-by-automobile — unlike the way they talked just a couple of years ago. Yes, that Silver Line is a boon to the areas newly served by it, but look what it’s done to the rest of the Metro system, clogging the rail tunnel under the River at Rosslyn beyond capacity, to the point that all tunnel use during peak hours must be rationed.

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