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Thursday, January 12, 2012

Tysons Corner, VA: The Next GSA Hot Spot?

Tysons Corner, VA: The Next GSA Hot Spot?
by Dan Gonzalez

Congress, especially the Republican controlled House, is putting intense pressure on the General Services Administration (GSA) to increase efficiencies and savings on office leases for federal agencies in the Washington, DC region. This includes making sure leases adhere to GSA rent caps: $34 per square foot in Maryland, $38 per square foot in Virginia, and $49 per square foot in the District of Columbia.

The coming of the Metrorail system to the Tysons Corner submarket in Northern Virginia, along with its favorable rates vis-a-vis the rent cap, should make Tysons the natural beneficiary of a movement of agencies from closer in facilities in the Rosslyn-Balston and Crystal City areas of Arlington County, and Washington. Metro is slated to open its four Tysons Corner stations in 2013. The area already has a large local labor force, and now with Metro -- the missing link -- it will make Tysons a very viable alternative for federal agencies.

The average rental rate in Tysons is $30.18 per square foot; whereas the average rent in the aforementioned Arlington submarkets is $40 per square foot. At the end of the year Tysons had a vacancy rate of 19 percent which translates to 4.23 million square feet available. In addition, there were were 13 blocks of space larger than 50,000 square feet available in the market.

The largest lease in Tysons in the second half of last year was Capital One taking 129,619 square feet at 8020 Towers Crescent Drive, which was vacated by IBM. Capital One needed the space after purchasing ING Direct.

Construction activity includes Lerner Enterprises breaking ground on 1775 Tysons Boulevard, a 476,000-square-foot building located adjacent to the Tysons II complex. The 18-story building is slated for fourth quarter 2013 delivery. Projected rates for this building will exceed the GSA rent cap. However, it should attract tenants from older buildings that could be backfilled by federal agencies.

These favorable market conditions, coupled with a new master plan, should bode well for a continued bright future for Tysons Corner and as a possible new home for federal agencies. Oh, and don’t forget about the Dulles Toll Road market either. Metro will service this corridor within the next few years providing more opportunities for federal agencies.

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