Developers are gobbling up land near Metro stations and much of the new construction in the area, whether apartments, condos, offices, shopping or hotels is near Metro stations.
For instance, of the 5.5 million square feet of office space under construction in the region at the moment, about 4.6 million of it, or 84 percent, is within a quarter mile of a Metro station.
So sure, real estate near Metro is more valuable, but measuring by miles may be using too big of a ruler. Researchers from the real estate services firm Cushman & Wakefield recently looked at real estate values in one of the region’s hotter markets for development, Arlington’s Rosslyn-Ballston corridor, and found that even among properties that are less than a third of a mile from a station, there is still a pretty well defined scale for how much property is worth, and the closer to the station the better.
For instance, looking at office properties near the five Rosslyn-Ballston stations, through which the Orange line runs, researchers found that offices within one-20th of a mile (264 feet) of Metro earn a more than 30 percent premium over those that are a quarter of a mile from a station.
This is no small sample size. There are now 101 office properties totaling 20.2 million square feet near the Metro stations in Rosslyn, Courthouse, Clarendon, Virginia Square and Ballston, 92 percent of it within a quarter mile of a station.
Washington commuters may walk faster than most, but if one assumes that the average walking speed for someone headed to work is around 3 miles an hour, walking a quarter of a mile takes five minutes, while walking a 20th of a mile takes one minute.
Is saving around four minutes of walking time per trip really worth paying that much more for real estate? Do executives think their companies perform better or attract and retain better talent because of that proximity? Apparently they believe they do.
“People don’t like to walk more than 10 minutes,” said Paula Munger, managing director of research for Cushman & Wakefield. “So being farther out just doesn’t attract the tenants that being near Metro does. People don’t want to take a shuttle. They want to walk to their office and preferably not even go outside, which is why if you’re on top of the station there is even more of an advantage.”
Munger and her team also looked at the rents that apartment buildings collect near Metro stations. There is more variance, likely due in part to the variance that newer, well-managed apartment buildings can achieve over older ones that have fewer amenities are more dated design.
Apartment buildings right on top of stations or nearly so (within a 20th of a mile) still command a premium, one that Cushman estimated at 23 percent over average rents for the area.
Properties more than a quarter mile from Metro, meanwhile, are available at an 18 percent discount off of average rents. “Investors know this. So that’s why they are buying properties that are on or near Metro, so they can command those higher rents,” Munger said.
Word to the wise: Realtors and brokers favor saying the properties they advertise are “steps” from Metro, but every one of those steps matters.
Follow Jonathan O’Connell on Twitter: @oconnellpostbiz