Fairfax developer John T. "Til" Hazel Jr., who in three decades has come to symbolize the burgeoning Northern Virginia real estate industry, said yesterday that he is turning his firm away from office development and will focus for now on affordable residences and strip shopping centers.
Hazel said the company decided to restructure after recently concluding that the office-space market had deteriorated further. "This is not the time ... to be doing anything dramatically high risk," Hazel said.
His development firm, Hazel/Peterson Cos., has laid off nine of its 64 employees, including three executive vice presidents, in the last two weeks. But Hazel said the firm is financially sound.
Instead, the company plans to turn its attention to managing its portfolio of 3 million square feet of office and retail space in Northern Virginia and to building strip shopping centers and 1,000 units of condominiums and apartments, where company executives say they see healthy demand.
According to Realty Information Group Inc., a McLean market research company, Hazel/Peterson ranks 20th in the Washington area on the basis of existing, under-construction and proposed buildings.
Hazel/Peterson's moves come amid a glut of development and a tightening of credit that have affected almost every real estate company in the area in some way, particularly in Northern Virginia, where Hazel/Peterson's business is concentrated. Fairfax County had 12.9 million square feet of vacant office space available at the end of September, more than four times the 3.2 million square feet absorbed in the county during the past year, according to Cor/Net Inc., a Rockville research firm.
As a result, desperate developers have laid off employees and are offering months, or years, of free rents and other concessions in order to land tenants. Hundreds of formerly high-paid real estate executives and managers are looking for jobs in a market where few are to be found in their profession.
Over the last 20 years, Hazel/Peterson, a 20-year-old partnership started by Hazel and a one-time legal client, Milton V. Peterson, has made its mark all over Northern Virginia. Its first major project was Burke Centre in what was then an isolated part of south-central Fairfax. Other big developments have followed, including Franklin Farm near Dulles International Airport.
Its crown jewel is one of its current projects, Fair Lakes, an office and residential complex in a campus-like setting in Fairfax County. It also has two other projects -- Virginia Center, an office and residential project at the Vienna Metro station that was embroiled in controversy for more than a decade, and Centre Ridge, a residential community in Centreville.
Within the real estate industry, Hazel/Peterson always has been thought of as one of the strongest players, in part because of Hazel's insistence on paying cash for undeveloped land. That conservative approach is well suited to difficult times such as these because Hazel does not find himself in the position of having to make interest payments to banks at a time when cash is short. "We don't leverage what we call our undeveloped inventory," Hazel said in an interview yesterday.
Hazel said the company stopped buying land about five years ago because it felt prices were getting too high. It started its last speculative office building -- a building for which no tenants have been lined up in advance -- two years ago. The company continues to custom-develop buildings for tenants willing to lease most of the space.
That conservative approach is paying off. According to Cor/Net, the firm's projects have a vacancy rate of 8.6 percent, compared with an overall vacancy rate of 17.4 percent for office buildings in Northern Virginia.
Staff writers David Hilzenrath and Brooke Masters contributed to this report.