Tysons Corner was largely undeveloped Virginia farmland until the 1960s, and did not become a major employment center until defense contractors set up shop there in the mid-1980s. Soon after, development exploded and the area boasted some of the fastest growth in the region. Now, Tysons Corner is one of the largest suburban centers in the country and one of the most popular addresses in the region. The area is expected to blossom further with the arrival of Metrorail’s Silver Line and the high occupancy toll (HOT) lanes on the Capital Beltway.
The Multifamily Market
Multifamily development is relatively new to Tysons Corner, as the first rental apartment buildings came online when contractors migrated to the area to set up offices. The area consists of about 1,400 Class A (built after 1985) rental units. However, with the construction of the Silver Line Metro and the Beltway’s HOT lanes, the pipeline is booming: 977 rental apartment units are currently under construction in the area. In addition, about 360 rental units may be completed in the next 36 months. Longer-term, more than 3,200 rental units are planned, with an additional 11,220 multifamily units in the pipeline that could be built as rental apartments or for-sale condos. Low-rise Class A apartment rents in Tysons Corner currently average $1,914 a month, or $2.10 a square foot, and vacancy is 2.4 percent. Concessions are rare.
There has been little recent activity in the for-sale condominium market, but there are about 1,240 units in the inventory that have been built since 2003. Of those units, only about 2.2 percent are still available for sale. There are no condo-specific projects planned, but a portion of the whopping 11,220 multifamily units in the pipeline may ultimately become for-sale units.
The Office Market
Despite the resurgence of multifamily development in Tysons Corner, new office construction has been slow because of elevated vacancy rates. There is 26.5 million square feet of privately-owned office space in the area with a direct vacancy rate of 14.5 percent as of the first quarter of 2012. If sublet space is added, the vacancy rate rises to 15.7 percent, similar to Fairfax County’s overall vacancy rate of 15.0 percent. Although defense contractors initially drove its rapid growth, Tysons Corner is now attracting tenants less dependent on the federal government. It has one of the nation’s largest concentrations of telecommunications and high-tech companies. Also, as evidenced by Hilton Hotels’ and Science Applications International Corp.’s recent decisions to make Tysons Corner their permanent homes, this area continues to be a preferred location for corporate headquarters. Annual net absorption since 2005 has been about 50,000 square feet. In 2011, 132,000 square feet was absorbed.
Maeve Gallagher is an associate at Delta Associates. Staff at Delta Associates contributed to this article. For more information, please visit www.deltaassociates.com.