Economic Development Update for Crystal City AED Presentation to CCCRC June 27, 2016
Arlington’s C Ar ’s Commer ercial O Office Va e Vacancy R Rate Vacancy Rate: 2012-2015 25% 21.7% ∆ = 1.6% 20% 20.1% 15% 12.6% 12.6% 12. 10% 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 2 Source: CoStar, AED
Why d did d the o office vaca canc ncy r rate c e climb? b? Regional Increased BRAC Economy Competition Space Old and Utilization New 3
Cr Crys ystal Ci City ty O Offi ffice M Mar arke ket T Trends Quarterly Office Net Absorption and Vacancy Rates in Crystal City, 1Q2011 to QTD 300,000 30.00% 200,000 25.00% 100,000 20.00% 0 -100,000 15.00% -200,000 10.00% -300,000 5.00% -400,000 -500,000 0.00% 2011 Q1 2011 Q3 2012 Q1 2012 Q3 2013 Q1 2013 Q3 2014 Q1 2014 Q3 2015 Q1 2015 Q3 2016 Q1 Net Absorption Vacancy Rate 4 Source: CoStar, AED
Se Selected Office M Mark rket Ava vaila ilabilit ility i in Cry rystal C l City B uilding Addres s B uilding Name Available S F 2511 Jefferson Davis Hwy Presidential Tower 278,720 2200 Crystal Dr Crystal Plaza 4 252,974 1750 Crystal Dr Crystal Square 3 240,702 3550 S Clark St National Gateway II 193,678 1400 Crystal Dr 1400 Crystal 183,914 1225 S Clark St Crystal Gateway 2 167,645 241 18th St S Crystal Square 4 155,665 2733 Crystal Dr Two Potomac Yard - North Tower 155,116 1550 Crystal Dr Crystal Square 2 142,917 2011 Crystal Dr Crystal Park One 140,544 2451 Crystal Dr Crystal Park Five 120,060 1401 S Clark St Jefferson Plaza 109,826 2450 Crystal Dr Century One at Century Center 101,941 2461 S Clark St Century Two at Century Center 89,456 2001 Jefferson Davis Hwy Crystal Plaza 1 85,260 1235 S Clark St Crystal Gateway 1 81,589 2900 Crystal Dr Potomac Gateway South 80,883 2611 Jefferson Davis Hwy Airport Plaza 2 78,890 5
Multif ifamily ily D Deliv iverie ies i in Arl rlin ington 2,500 2,000 1,449 = 10-year average of Units Delivered 1,500 Residential Units Apartment Condo 1,000 500 - 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 Source: AED
Crysta tal C City M Multifa family A Apartm tment M t Market T t 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 0.00% 2011 Q1 2011 Q3 2012 Q1 2012 Q3 2013 Q1 2013 Q3 2014 Q1 2014 Q3 2015 Q1 2015 Q3 2016 Q1 Net Absorption Vacancy Rate 7 Source: Costar, AED
Ar Arlington’s E ’s Econo nomic D Dev evel elopmen ent S Strateg egy A St Strat ategy o on Focu cused D Diversifica cation an and Tar arget I Industries 1. Education IT 2. Healthcare IT 3. Cybersecurity 4. Data Analytics 5. Energy 8
Ar Arlington’s E ’s Econo nomic D Dev evel elopmen ent S Strateg egy FY 2016 Outcome 3 of 34 42 Received CLOSED and INCENTIVES Announced Deals 34 Deals with Business Investment Group (“BIG”) Assist 1,840,000 SQ FT of 9,300 JOBS New Real Estate or Retained 1,610,000 SQ FT with BIG Assist 8,400 Jobs with BIG Assist Source: AED, CoStar 9 Fiscal Year 2016 YTD (July 1, 2015 - Feb. 22, 2016)
Cryst stal C City E Econo nomic D Dev evel elopment Hi 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
Redevel elopm pment ent and R nd Reinves estment ent M Moving F 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 Under this Additional Existing asset scenario, the Financially density of X4 considered for project can not supportable land required to write redevelopment support values at down going-in has value of additional $50/FAR SF basis to market $200/SF community supported level benefit costs
Strateg egic P Public I Inves estment ents FY 2015 FY 2016 FY 2016 FY 2017 ACTUAL ADOPTED RE- PROPOSED ESTIMATE ADJUSTED BALANCE, JULY 1 Construction Reserve $6,828,6 $5,997,626 $8,915,876 $10,823,046 94 Reserve - 450,000 350,000 350,000 TOTAL BALANCE ,347,626 ,265,876 ,273,046 11 6,828,694 6 9 REVENUES Tax Increment Area 4,812,420 3,332,465 3,096,740 4,207,170 State Transportation Grant Revenues - 50,225 - - NVTC Revenues 1 - 84,599 - - TOTAL REVENUES 4,812,420 3,467,289 3,096,740 4,207,170 16,085,466 TOTAL REVENUES & BALANCE 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 3 - 431,341 - Contingency 860,000 - 352,808 200,000 TOTAL EXPENSES 1,030,107 3,880,889 2,200,000 9,460,000 BALANCE, JUNE 30 Construction Reserve 6,125,466 8,915,876 5,213,477 10,823,046 Reserve 2 500,000 350,000 350,000 450,000 TOTAL BALANCE $9,265,876 $5,563,477 $11,273,04 $6,625,466 6
Redevel elopm pment ent and R nd Reinves estment ent M Moving F Forward Supporting adaptive Flexibility reuse/ on building innovation use and footprints Continue to invest in ground plane/retail Maximizing investment opportunities
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