The U.S. Environmental Protection Agency leased more than 400,000 square feet in two office buildings under construction as the beginning of a $2 billion residential, office and retail complex planned for the Potomac Yard site in Arlington County.
The EPA's 10-year lease will help jump-start what real estate brokers and economic development officials say is the county's biggest redevelopment project. It is one of the biggest leases in years in Northern Virginia.
The area around the site, just south of Crystal City on the Potomac River, for decades has been home to the offices of defense contractors such as the giant aerospace concern Boeing Co. because of its proximity to the Pentagon and other government agencies.
"It's a huge win for a new development to get a large government agency," said Dave Millard, a senior director at brokers Cushman & Wakefield. "It really puts it on the map. It also solidifies Arlington's position as the premier home to federal agencies and contractors."
The developer, Crescent Resources LLC of Charlotte, N.C., plans to turn the 300-acre site straddling Arlington County and the city of Alexandria into 4.7 million square feet of office space, more than 2,900 condominiums and apartments, 235,000 feet of shops and restaurants and two 600-room hotels over as many as 15 years.
The lease is worth about $140 million, said Loran Adams, Crescent's vice president of development for the Potomac Yard project. The EPA is paying in the upper $30-a-square-foot range, he said.
The agency will consolidate three satellite offices it rents for administrators in nearby Crystal City. It expects to move to the two 12-story office buildings when they are completed in 2006.
Crescent Resources is a unit of Duke Energy Corp., whose assets include electric utilities in North and South Carolina and interstate natural gas pipelines and gathering systems. Most of Crescent's projects are in Atlanta, Tampa, Nashville and Charlotte. Potomac Yard is its first major project in the Washington area.
The site was a switching yard for the Richmond, Fredericksburg & Potomac Railroad from the 1830s until the early 1990s. Crescent says it paid developer Commonwealth Atlantic Properties more than $100 million for it in 2001.
Five years ago, Commonwealth Atlantic developed a small portion of the site into a strip mall with "big-box" stores such as Target.
"At one point we were going to build it on speculation [without a tenant]," Adams said. "We thought we were close to a deal so we decided to wait, and we were right on our suspicions.''
The EPA's buildings will be LEED (Leadership in Energy and Environmental Design) certified by the U.S. Green Building Council, a coalition that promotes construction of buildings that are environmentally sound. Crescent Resources' Potomac Yard buildings will have energy-efficient windows, heating and air-conditioning systems, and recycled materials in ceiling tiles and drywall.
Crescent Resources said it also plans to build an office building on 100 acres it owns in Chantilly, about 30 miles away.