The arrival of Metro’s new Silver Line to the neighborhoods of Reston and Herndon is likely to hasten a transformation that will bring taller buildings and a more urban feel to the area.
The first phase of the Silver Line is scheduled for completion in late 2013 and terminates at Wiehle Avenue in Reston. The second phase will continue through Reston into Herndon, past Dulles Airport and into Loudoun County. The road network supporting this market is already very good, with direct access to the Dulles Toll Road, the Capital Beltway to the east and Route 28 and Dulles Airport to the west.
Currently, the high end apartments in the Reston-Herndon area are a mix of older garden-style apartments and newer mid-rise and high-rise projects.
The shift away from low-density apartments is likely to strengthen when the Silver Line opens, especially in Reston. As of the second quarter of 2012, low-rise Class A rents in Reston and Herndon averaged $1,625 a month, or $1.61 a square foot. The vacancy rate is 2.8 percent, lowest among all the low-rise markets in Fairfax County, and as a result rents over the past year have increased 5.4 percent.
The area has had average rent increases of 3.2 percent annually since 1989. Discounts make up 1.1 percent of asking rent, below the 1.6 percent average for Class A low-rises in Northern Virginia. There are two rental projects with 772 units under construction, and an additional five with 1,527 units planned to deliver over the next 36 months. Six of the seven projects to deliver within 36 months are either mid-rise or high-rise. There are no condos being built.
There are 30 million square feet of offices in the Reston-Herndon area, anchored by Reston Town Center, which opened in 1990 and quickly became the focal point for businesses, retailers and housing. About 4.3 million square feet is available to lease, which equates to a direct vacancy rate of 14.2 percent as of the second quarter of 2012. If sublet space is included, the vacancy rate rises to 15.3 percent, slightly above the county-wide rates of 13.6 percent and 14.8 percent, respectively.
Since 1997, the amount of leased space in the area has risen an annual average of 721,000 square feet. About 391,000 net square feet of additional space was leased during 2011. However, during the first half of this year, 330,000 net square feet was vacated. The federal government’s planned budget cuts, known as sequestration, have caused some government contractors to reduce staff and occupancy costs. The average effective rent in Reston-Herndon dropped to $19.30 per square foot at the end of the second quarter of 2012, from $19.80 per square foot at year-end 2011, a decrease of 2.5 percent.
Overall, the Reston-Herndon real estate market has very strong fundamentals for multifamily properties. While the office market is showing signs of weakness, the Silver Line is poised to help in the long term.
Michael Donnelly is a senior associate at Delta Associates. Staff at Delta Associates contributed to this article. For more information, please visit www.deltaassociates.com.