Economic Development Update for Crystal City AED Presentation to CCCRC June 27, 2016
Arlington’s Commercial Office Vacancy Rate
Vacancy Rate: 2012-2015 25%
21.7% ∆ = 1.6% 20%
20.1%
15%
12.6% 12.6% 10%
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
Source: CoStar, AED
2
Why did the office vacancy rate climb?
BRAC
Regional Economy
Space Utilization
Increased Competition
Old and New
3
Crystal City Office Market Trends 300,000
Quarterly Office Net Absorption and Vacancy Rates in Crystal City, 1Q2011 to QTD
30.00%
200,000
25.00%
100,000 20.00%
0
15.00%
-100,000 -200,000
10.00%
-300,000 5.00%
-400,000 -500,000
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
Net Absorption Source: CoStar, AED
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
0.00%
Vacancy Rate 4
Selected Office Market Availability in Crystal City Building Address
Building Name
Available SF
2511 Jefferson Davis Hwy 2200 Crystal Dr 1750 Crystal Dr 3550 S Clark St 1400 Crystal Dr 1225 S Clark St 241 18th St S 2733 Crystal Dr 1550 Crystal Dr 2011 Crystal Dr 2451 Crystal Dr 1401 S Clark St 2450 Crystal Dr 2461 S Clark St 2001 Jefferson Davis Hwy 1235 S Clark St 2900 Crystal Dr 2611 Jefferson Davis Hwy
Presidential Tower Crystal Plaza 4 Crystal Square 3 National Gateway II 1400 Crystal Crystal Gateway 2 Crystal Square 4 Two Potomac Yard - North Tower Crystal Square 2 Crystal Park One Crystal Park Five Jefferson Plaza Century One at Century Center Century Two at Century Center Crystal Plaza 1 Crystal Gateway 1 Potomac Gateway South Airport Plaza 2
278,720 252,974 240,702 193,678 183,914 167,645 155,665 155,116 142,917 140,544 120,060 109,826 101,941 89,456 85,260 81,589 80,883 78,890 5
Multifamily Deliveries in Arlington 2,500
2,000
1,449 = 10-year average of Units Delivered Residential Units
1,500
Apartment Condo 1,000
500
-
Source: AED
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
6
Crystal City Multifamily Apartment Market Trends Crystal City MF Apt Net Absorption and Vacancy Rate, 1Q2011 to QTD 500
7.00%
507 net apartments absorbed since 2011
400
6.00%
300
5.00%
200
4.00%
100
3.00%
0
2.00%
-100
1.00%
-200
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
Net Absorption Source: Costar, AED
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q1
0.00%
Vacancy Rate 7
Arlington’s Economic Development Strategy A Strategy on Focused Diversification and Target Industries
1. Education IT 2. Healthcare IT 3. Cybersecurity 4. Data Analytics 5. Energy
8
Arlington’s Economic Development Strategy
FY 2016 Outcome
42
CLOSED and Announced Deals
34 Deals with Business Investment Group (“BIG”) Assist
9,300
JOBS New or Retained
8,400 Jobs with BIG Assist Source: AED, CoStar Fiscal Year 2016 YTD (July 1, 2015 - Feb. 22, 2016)
3 of 34
Received INCENTIVES
FT of 1,840,000 SQ Real Estate
1,610,000 SQ FT with BIG Assist 9
Crystal City Economic Development Highlights • Crystal City is becoming an emerging tech hub with 1776, Eastern Foundry, Tech Shop & WeLive/WeWork • German grocer LIDL establishes North American headquarters acquiring over 200,000 square feet at National Gateway I • The DoD renews 912,000 square feet in the Polk and Taylor buildings • Retention & expansion of the U.S. Marshals Service occupying over 300,000 square feet • Resurgence of non-profits with new move-ins including American Diabetes Association, Association for Professionals in Infections Control, Society of Manufacturers and Affiliates, American Intellectual Property Law Association
Redevelopment and Reinvestment Moving Forward Redevelopment Economics and Community Benefits • Even older, vacant buildings have a value, or going-in basis • The value of the existing asset essentially becomes the residual land value under a redevelopment scenario • Additional density can “write down” that residual land value to a number that is supportable financially • Future redevelopment opportunities should consider the impact of the cost of extraordinary community benefits on project viability
Financially supportable land values at $50/FAR SF
Existing asset considered for redevelopment has value of $200/SF
Additional density of X4 required to write down going-in basis to market supported level
Under this scenario, the project can not support additional community benefit costs
Strategic Public Investments FY 2015 FY 2016 FY 2016 ACTUAL ADOPTED REESTIMATE ADJUSTED BALANCE, JULY 1 Construction Reserve Reserve
$6,828,6 94 -
$5,997,626
$8,915,876 $10,823,046 450,000
6,828,694
350,000 ,347,626 6
350,000 ,265,876 9
3,332,465
3,096,740
4,207,170
TOTAL BALANCE
FY 2017 PROPOSED
,273,046 11
REVENUES Tax Increment Area
4,812,420
State Transportation Grant Revenues
50,225
-
-
NVTC Revenues1
84,599
-
-
TOTAL REVENUES
4,812,420 3,467,289
3,096,740
4,207,170
TOTAL REVENUES & BALANCE
16,085,466 10,295,983 9,444,366
13,473,046
EXPENSES Capital Projects - Current Year
4,812,420 1,030,107
3,096,740
2,000,000
Capital Projects - Carry-Over
,787,580 -
431,341
Contingency TOTAL EXPENSES
860,000 1,030,107
352,808 3,880,889
200,000 2,200,000
8,915,876
5,213,477
10,823,046
350,000 $9,265,876
350,000 $5,563,477
450,000 $11,273,04 6
BALANCE, JUNE 30 Construction Reserve
9,460,000
6,125,466
Reserve 2 TOTAL BALANCE
3
-
500,000 $6,625,466
Redevelopment and Reinvestment Moving Forward
Flexibility on building use and footprints
Supporting adaptive reuse/ innovation
Continue to invest in ground plane/retail
Maximizing investment opportunities