Things are getting better for Tysons’ economy, but slowly.
For offices around Tysons, the boom anticipated with the opening of the Metro in 2014 has been more of a trickle as growth continues at a more sluggish pace than initially anticipated.
“Despite slow demand growth at the metro level, some has trickled down to Tysons, helping vacancies improve slightly over the past few years,” the report said. “An explosion in the residential population has not yet been matched by strong office-demand growth, despite four Metro stations opening in the submarket.”
While the expansion of the Capital One facility was a welcome boon, the report notes that most tenants are not actively expanding their footprint and there has been a spate of large move-outs, specifically pointing to public affairs consulting group Interel’s decision to leave Tysons for Washington D.C.’s East End Submarket.
Which isn’t to say there haven’t been plenty of new clients coming into Tysons. Apian announced in April it would be moving to Tysons while Cvent announced it would be expanding its local offices. Facebook is also reportedly looking for space at Tysons II to occupy between 75,000-85,000 square feet.
In 2015, office vacancies in Tysons were near 18 percent. Since then, vacancies have steadily fallen to 15.6 percent. Forecasts for the market show vacancies taking a dip in middle-2019 then continuing a steady decline.
The high supply of office and relatively low demand led office rents in Tysons to face a steep decline from 2012-2014. There’s been some growth there, averaging about 2 percent from 2015-2018, but the report also warned not to view that growth as a trend.
“High vacancies could continue weighing on growth,” the report said. “Rents have continued their increase this year but at a relatively slow pace — as of early December, rents had increased by roughly 2 percent for the year. At the metro level, rents surpassed their pre-recession peak in 2015, but those in [Tysons] are just now reaching that point.”
The report did note that Tysons isn’t alone in its lackluster rent growth, that several other locations across Fairfax have also faced similar low rents.
None of this has slowed construction, however. There was 1.2 million square feet of new office space created between 2014-2017. Last year also saw a record high of office space opening with Capital One’s 975,000 square foot expansion.
The Boro is anticipated to include 582,000 square feet of new office space. Boro Tower, the main office component of the project, is currently 70 percent pre-leased and is expected to be ready sometime this year.
The View at Tysons is further out in development but is expected to include 570,000 square feet of office space and the region’s tallest building as part of a 2.8 million-square-foot mixed-use development.
Auditing giant KPMG LLP will be bringing $30 million dollars and 500 new jobs in a sweeping expansion of its Tysons operations.
KPMG will be moving into seven floors of Boro Tower, part of a massive mixed-use development near the Greensboro Metro station, Virginia Gov. Ralph Northam (D) announced Wednesday morning.
The building, expected to open in early 2019, is a block away from the offices that KPMG currently occupies at 1676 International Drive. That building, in turn, is also set for a substantial renovation.
A $1 million grant from the Commonwealth’s Opportunity Fund was approved by Northam as an economic incentive to facilitate the move. Virginia also offered a slew of other incentives, including a Major Business Facility Job Tax Credit for the new full-time jobs coming with the expansion and employee retraining activities provided by the Virginia Jobs Investment Program.
“We’re committed to Fairfax County and are excited about the growth that we’re seeing here in world-class innovation and leading-edge technology — two areas that align with our own core services and strategic approach,” said Jerry Carlson, a KPMG managing partner, in a press release.
The expansion was also facilitated with local help from the Fairfax County Economic Development Authority (FCEDA) and the Virginia Economic Development Partnership.
“KPMG has been a major employer and corporate citizen in Fairfax County for years, and we are delighted to see that the company has chosen the county as a base to expand its audit, tax and advisory business significantly,” said Gerald Gordon, president and CEO of the FCEDA, in a press release. “This coincides with the continued growth and diversification of the county economy and the increasing realization that this is a great draw for the workforce the company wants to attract and retain.”
“This illustrates our strength in the professional services sector that creates so many jobs here, and is a great vote of confidence in the kind of business community that we promote here,” a FCEDA spokesman added.
Fairfax startups are economically strong but disproportionately tied to the public sector, even compared to other nearby jurisdictions, according to the 2017 Startup Census.
Adam Zuckerman, founder of census creator Fosterly, spoke to the Fairfax County Economic Advisory Commission meeting earlier this month to offer a recap of Fairfax’s role in the survey of local startups.
In total, 48 companies from Fairfax participated in the survey, while 377 businesses from around the region were surveyed in total.
- The Fairfax startups that participated in the survey generated $28 million dollars in revenue in 2017 and projected 194 percent growth in 2018.
- Startups throughout Northern Virginia generated $108 million in revenue and projected 166 percent growth.
- Throughout the entire region, startups generated $193 million in revenue and projected 217 percent growth overall.
- Fairfax County is home to about 12.5 percent of startups in the D.C. area.
According to the survey, startups in Fairfax also derived less of their revenue from consumers or private businesses than the regional average.
- Fairfax startups derived 66 percent of their revenue from private sector customers.
- Regional startups averaged 89 percent revenue from private customers.
“If you look towards the larger set, only 11 percent of revenue in the overall set came from the public sector,” said Zuckerman. “So Fairfax County companies have a disproportionate amount of public sector revenue than the larger ecosystem.”
Ryan Touhill, chief of staff for the Alexandria Economic Development Partnership, said in the survey analysis that the regional shift away from a reliance on the public sector is a positive trend for local economic diversification.
For Fairfax, Zuckerman said this public sector reliance for startups that are generally less than five years old is unusual because most public sector deals require a track record that startups generally don’t have. Most startups, Zuckerman said, start off working in the private sector before dipping their toes into the public sector when the product is proven.
The survey also found that the top five industries in Fairfax for startups were technology and services, computer software, real estate, financial services, and management and consulting.
There was one unfortunate item of news about one company in particular: Fosterly, the company running the census. Unless another organization takes over the mantle, Zuckerman says this year’s census will be the last.
“We’re not doing it again this year,” said Zuckerman. “We’re going to be talking to a few entities to see if they want to continue the census… but the resources weren’t there.”
Photo via Fosterly
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Fairfax Economic Indicators Look Good — Tax receipts and home prices are up in Fairfax County, while unemployment is down to 2.4 percent. [Fairfax County]
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