Only seven ground-up office projects are left in the Northern Virginia RB Corridor’s proposed pipeline ahead
If you’ve walked through the RB Corridor any time the last two decades, one visual is constant – construction signs.
March 12, 2019
- If you’ve walked through the RB Corridor any time the last two decades, one visual is constant – construction signs announcing new office, residential and retail buildings. Expect the trend to continue for residential, retail and even hotel, but signs announcing future office space will be more limited, particularly for ground-up new construction as the RB Corridor evolves into an even greater mixed-use environment.
- From 2000 through 2020, 33 office buildings totaling 7.6 m.s.f. delivered in the RB Corridor. Looking ahead, only seven office buildings are proposed as ground-up new construction, totaling 2.9 m.s.f. and another two buildings totaling 297,432 m.s.f. as full-scale redevelopments.
- The pipeline is especially sparse between Courthouse and Ballston, where 75% of the corridor’s total inventory delivered since 2000. Ahead, only two ground-up projects are proposed: 3901 N Fairfax in Virginia Square and 2025 Clarendon in Courthouse. Ballston and Clarendon, on the other hand, have no ground-up projects left in the pipeline, with the balance consisting of proposed renovations to add creative office to two existing buildings. Meanwhile, Rosslyn controls 87% of the proposed ground-up pipeline, after having delivered only 25% of the corridor’s supply since 2000. Of the 2.5 m.s.f. proposed in Rosslyn, four of the five projects are projected to deliver in 2025 or later, with each requiring demolishing existing buildings before construction can begin.
- While the RB Corridor’s ground-up office pipeline is already sparse, the total could shrink further if developers switch permitted uses to multifamily to meet strong residential demand or rezone the project as mixed-use to achieve a smaller prelease needed to kick-off construction for the office component. For example, 4040 Wilson was rezoned from a planned 419,830-s.f. office building to a mixed-use building with 191,300 s.f. of office and 244 residential units. The project, which delivers in 2020, kicked off after AvalonBay signed a 73,242-s.f. prelease.
- Ahead, submarkets outside the Beltway, particularly along the Silver Line, will lead Northern Virginia’s future development pipeline. For example, Tysons and the RB Corridor both comprise 22 m.s.f. of existing inventory today, but an additional 22 m.s.f. is proposed for Tysons, versus only 2.9 m.s.f. for RB. Meanwhile, the Toll Road has 13.4 m.s.f. of proposed office, adding to the 26 m.s.f. of existing inventory today. As the development pipeline shifts outside the Beltway, pricing for new construction along the Silver Line from Rosslyn to the Toll Road will look increasingly similar, driven in part by elevated construction costs, plus the fact that tenants seeking new construction will have multiple submarkets to choose from, leading to more cross-shopping. Rosslyn will maintain a premium over the broader market, with rents expected to be in the upper-$60s p.s.f.+ FS for the next wave of construction, while pricing along the rest of the Silver Line corridor out to the Toll Road will be in the upper-$50s to low-$60s p.s.f. FS.
Source: JLL Research