What happens when the popular (yet geographically limited) metro system in the only market that has really held up during the recession decides to expand? You have a lot of apartment developers and owners in Washington, D.C., salivating.
That’s what's happening in the recession-resistant Washington, D.C., market where the long-awaited Silver Line metro route from the city center to Dulles International Airport is becoming a reality. The line will run though Tyson’s Corner (already a hotbed of jobs and retail activity) and snake through Reston, Va., and the Dulles Town Center before arriving at the airport.
So far, the development activity has been limited to Tyson’s Corner—an apple in the eye of many multifamily owners with its high ratio of retail and jobs to apartments. “The type of density that’s been approved in Tyson’s makes it’s a pretty attractive sub-market,” says Jorgen Punda, regional vice president of investments for Gables Residential, an Atlanta-based apartment owner with holdings in Northern Virginia. “I think what’s even more compelling is the ratio of jobs to housing in Tyson’s. It’s clearly underserved on the housing side.”
That’s why developers are seeking land. Earlier this month, Arlington, Va.-based AvalonBay Communities bought 2.64 acres in Tyson’s Corner for a 354-unit property. The McLean, Va.-based West Group, a real estate developer, sold its holdings in Tyson’s Corner to New York-based DLJ Real Estate Capital Partners, part of Credit Suisse's Real Estate Investments Group. DLJ plans to build 3,000 units on the site. Even, Capital One, a Washington, D.C.-based financial services firm, wants to build a mixed-use project.
Other major stakeholders in the area include Bethesda, Md.-based Lerner Enterprises; Santa Monica, Calif.-based shopping mall owner Macerich; Boston-based estate investment management services provider AEW Capital Management, and Philadelphia-based apartment owner The Pennrose Cos., according to Alexandria, Va.-based Delta Associates, which tracks the Washington real estate market.
Despite the promise of the Tyson’s market, many landowners still have plotted their next steps. “There are lots of landowners in the Tyson’s Corner area who are in the process of trying to figure out what their master plans will be for,” says William Rich, vice president and director of condominium practice for Delta. “They may want to sell off whole or small parts.”
Cindy Clare, who runs McLean, Va.-based Kettler’s management company, says she’s fielded a lot of calls from people trying to figure out what rents are in the area. “They’re calling us to get a sense of where the market is in Tyson’s and where the market will go,” she says. “There are several parcels and people are very interested in starting to get ahead of that curve.”
Despite the Avalon deals, Punda doesn’t see a real increase in sales activity in the areas. Rich thinks things will quickly pick up though. “The closer to the time that metro will open, I think you’ll see more activity in terms of trading,” Rich says.
Despite this, not everyone is snooping around Tyson’s Corner. Gables Residential, which recently announced that it was building 120 units in Fairfax, Va., isn’t seeking opportunities in Tyson’s because it is working on four other projects. But that doesn’t mean Gables won’t be looking for land in the next couple of years as construction of the Silver Line pushes westward towards the airport.
“There are opportunities in Dulles Town Center that people are excited about [in the next five year],” Punda says. “Opportunities like that that may have been on the outer fringe, but are now considered metro oriented with the extension of the Silver Line.”