Future office development is limited along the RB Corridor
With both Rosslyn and Ballston making major transformations, the RB Corridor has become a submarket full of lively mixed-use development catering to a large and rapidly growing millennial population.
The Rosslyn-Ballston (RB) Corridor continues to undergo a dramatic shift.
Historically, construction signs announcing new office have been a constant visual, but that’s all about to change. Residential, retail and even hotel new development will flourish, but future office space construction will become more limited as the RB Corridor evolves into an even greater mixed-use environment. Only a small number of ground-up office projects are left in the RB Corridor’s proposed pipeline, and while the office development pipeline is already sparse, it could continue to shrink even further.
Over the last two decades, 33 office buildings totaling 7.6 million square feet were delivered in the RB Corridor – a third of the submarket’s total inventory of 22 million square feet. Moving forward, we will see a major decline in new office delivery as mixed-use development continues to soar. According to JLL research, there’s only seven new office buildings totaling 2.9 million square feet proposed in the pipeline with two full-scale redevelopments totaling 297,432 million square feet. “A mix of retail and residential projects creates a more vibrant submarket and attracts new tenants. While the RB Corridor once consisted mostly of office, its trending toward a more desirable live-work-play environment with its recent mixed-use deliveries,” says Yorke Allen, managing director with JLL, who is no stranger to the RB Corridor with 16 years of agency leasing experience in the submarket.
In addition to seeing a shift from office to mixed-use, there’s also a shift in new office development from one end of the submarket to the other. According to JLL research, the office pipeline is especially sparse between Courthouse and Ballston, where 75% of the corridor’s total inventory delivered since 2000. Only two ground-up projects are proposed, one in Virginia Square and the other 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. Rosslyn controls 87% of the proposed ground-up pipeline, after having delivered only 25% of the RB Corridor’s supply since 2000. Of the 2.5 million square feet proposed in Rosslyn, four out of the five projects aren’t set to deliver until 2025 or later, with each requiring demolishing existing buildings before construction can begin.
To top it off, the ground-up office pipeline could shrink further if developers decide to switch permitted uses to multifamily to meet strong residential demand or rezone projects from office-only to mixed-use to ensure project commencement. “An office project typically requires a 40% prelease to start construction. With the residential demand in the area, it’s easier to find apartment renters or retail tenants. It’s more of a guarantee.” says Allen. JLL’s agency leasing team worked with Shooshan Companies and Brandywine to rezone Liberty Center at 4040 Wilson Boulevard from a planned 419,830-square-foot office building to a mixed-use building with 191,300 square feet of office and 244 residential units. The project, which delivers in 2020, kicked off after AvalonBay signed a 73,242-square-foot prelease.
Outside the Beltway
Submarkets outside the Beltway, particularly along the Silver Line, will lead Northern Virginia’s future office development pipeline. According to JLL research, while both Tysons and the RB Corridor have 22 million square feet of existing office inventory, an additional 13.4 million square feet is proposed for Tysons versus the 2.9 million square feet along the RB Corridor. Tenants looking for new space in the RB Corridor will have limited options compared to Tysons and the Toll Road. “It is important for tenants with interest in the RB Corridor to move sooner rather than later as leverage will soon shift in favor of landlords,” says Allen.
As the development pipeline shifts, pricing for new construction along the Silver Line from Rosslyn to the Toll Road will look increasingly similar. This will be driven in part by elevated land, construction costs and more tenant options. While Rosslyn will maintain a premium over the broader market, pricing along the rest of the Silver Line corridor out to the Toll Road will trail slightly in comparison.
For more insights on the Northern Virginia market, visit JLL online at jll.com/dc.
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