Meridian and its managing director, Gary Block, initially considered reselling the properties after the Silver Line opened. But as they began to work on the project he and his partners noticed something: Companies were willing to pay a lot more to be there than they expected.
Block said when Meridian made its buy, companies were leasing space in the area for barely more than $20 per square foot but that months later they began agreeing to pay much more. And as the economic recovery took hold, rents began topping $40 per square foot. In 19 months Meridian inked 19 leases for around 400,000 square feet in total.
So instead of selling, the company decided to develop the properties itself. In January, Fairfax County approved a project encompassing a staggering 4.2 million square feet — one of the biggest developments ever envisioned for Northern Virginia — on what’s currently mostly surface parking lots. Construction on the first phase will begin this summer.
In targeting tenants, Block and his partners realized early they could pretty easily swipe companies from buildings that were nearby but in more suburban, less walkable areas far from Metro.
Speaking at a forum held by the Urban Land Institute in February, Block pointed out that there is nearly 30 million square feet of office space in Tysons already. So long as he convinces enough companies to pay more to be at his property than the ones nearby, he’s set, even if no one choose Tysons over Reston Town Center, Arlington or the District.
“You just need Tysons-to-Tysons moves,” he said.
“We’re a big believer in what you’d call the winners and the losers,” he added proudly. Near Metro, he claimed: “You will win. You will succeed.”
Those Tysons-to-Tysons relocations are now driving massive office construction in the area despite bloated office vacancy in Northern Virginia; even if companies aren’t looking for more space, their moves to Silver Line-accessible buildings keep the cranes digging.
Sean McDermott, a director at real estate investment banking company Eastdil Secured, agreed that proximity to Metro is more valuable than ever. Developers pricing their properties needed to ask themselves, he said: “Are you walkable from a quarter mile? Are you walkable from a half mile? After that, rates seem to drop off significantly.”
Block acknowledged that to this point, the number of Metro riders entering and exiting the Greensboro had been a “huge disappointment.” He said he sent a staffer to sit at the station from morning until evening one day to count the passengers and wasn’t pleased to see so few.
But the other thing Meridian is promising is an urban environment, and on that point it is pulling out all the stops. The first phase, designed in tandem with residential builder Kettler and architect Shalom Baranes, calls for 800 residential units, 400,000 square feet of office space and 223,000 square feet of retail including a Whole Foods Market, a craft beer brewery and a 15-screen Kerasotes Showplace movie theater.
All of it will be arranged around a one-acre public park and is scheduled to begin opening in 2018.
Block thinks The Boro, as Meridian branded the project, and others like it can turn Tysons into a “tier one” American city, so that people think of Tysons “more like D.C. and less like Charlotte.”
“I think Tysons, at the end of the day, many years from now, will become totally urban,” he said.
That’s a lot of cheer-leading for an area still dominated by shopping malls and surface parking and which remains among the most congested places to work or live in the country. And Block’s advantage won’t last forever. As more mega-projects begin to emerge, the best planned, best designed ones could begin to distinguish themselves. McDermott cautioned against erecting enormous projects that have no differentiation to them and end up feeling “all part of this staged Hollywood set” and nothing like an actual cities.
“If every owner is starting to think that way around the Metro stations, then we truly get the urban environment that everyone had hoped for,” McDermott said. “Versus, you know hey, we’re going to use a suburban model, we’re just going to put it next to a Metro station…You have to be careful how you create a sense of community.”
The risk is building places that look and feel like outdoor shopping malls. And Tysons has enough malls.
Follow Jonathan O’Connell on Twitter: @oconnellpostbiz