If Tysons wins office tenants, which market loses?
If commercial real estate in an evolving, soon-to-be Metro-accessible Tysons Corner begins to win office tenants, which other local markets will lose out?
Tysons real estate is still cheaper than that in most Northern Virginia areas that already have Metro. Asking lease rates for Class A office space in Tysons averaged $33.37 per square foot in the second quarter, well below Eisenhower Avenue ($38.57), Crystal City ($39.17) and anything in the Rosslyn-Ballston corridor ($39-$45), according to CB Richard Ellis.
But experts say it isn't the closer-in Metro suburbs -- or locations in Maryland and D.C. -- that will be losing out if Tysons begins landing more deals, it's the other neighborhood markets in Fairfax County.
Reston is at the top of the list of Tysons competitors, experts say. The submarket features a walkable, urban design, also has Metro coming and at about $29 per square foot is cheaper than Tysons. Reston filled about 200,000 square feet in the first half of 2010, besting Tysons's 175,000 square feet, according to Scott Homa, Jones Lang LaSalle's research manager. Homa said Reston and Merrifield, another Fairfax County neighborhood, have the most to lose when Tysons wins.
"Unlike the markets inside the Beltway that are dominated by federal leasing activity, these markets outside the Beltway are more dependent on highly-cyclical industries like technology, consulting, legal services and finance," he said.
Jeffrey Kottmeier, vice president at Cassidy Turley, said tenants are finding deals in the Dulles corridor, filling buildings that maybe stood empty in the recession but that offer higher quality than some companies previously thought they could afford. But Kottmeier still expects Tysons to begin commanding more deals and higher rents. "I think longer term, they'll still come back to Tysons," he said. "It's still the business center, and as you get that Silver line completed, you're getting some of that access that you currently get with the Arlington area."
Most commercial tenants will look past the temporary construction and traffic delays, said Marianne Swearingen, research manager for CB Richard Ellis.
"They're looking at what the future impacts are going to be and where they hope to be in five years, or 10 years," she said.