News

Recent Office Exodus Could Be Hurdle for F.C.’s West End Project

THE OFFICE SPACE that’s a part of the West End Project is the blue square in the lower left hand portion of the site map. In the second phase of the development two spaces — outlined in red along the map’s perimeter, can also take on more office space, if the market demand is there. (Screenshot: News-Press.)

Workplaces transitioning out of the office and into being permanently remote could be one part of the “new normal” stemming from Covid-19’s global outbreak. That potential reality would be trouble for the City of Falls Church’s West End development that is relying on office tenants to help occupy some of its nearly 10-acre footprint, though the minds behind the project believe this adaptation won’t become a fixture once coronavirus’ danger lessens.

The West End development will sidle up to the rebuilt high school and be a part of a new commercial corridor with the West Falls Church Metro station that sits just outside of the City proper. The principals of EYA, Hoffman & Associates and Regency have plans for retail, senior living and micro units, all of it to be centered around a public area for recreation. And helping buttress these attractions will be, according to the City’s web page dedicated to the project, 325,000 sq. ft. of Class A commercial office space.

Outside of its intent to build more housing, office space is, right now, the second largest commitment in the project based on space alone. That’s why the collective recoil toward the office environment over the past few months would make any developer want to loosen their collar at the thought of going through with it, at least in the short term.

“Based on the current climate of uncertainty, the market seems to be experiencing the biggest impact in the short term as it relates to increased vacancies, declines in new leases and an uptick in renewals,” Robin Bettarel, vice president of development at Hoffman & Associates, told the News-Press over email. “As more information becomes available and as recovery timelines solidify, we anticipate the future office leasing market outlook to trend more positively.”

One of the safeguards the City has built into the project is dividing it into phases. City council member Ross Litkenhous, who has a 20-year career in commercial real estate, said Falls Church has a firm, minimum commitment to the developers for roughly 125,000 sq. ft. of office space just based on the purchase price.

ONE EXAMPLE of an office space that comes in around the 125,000 sq. ft. mark are found in Arlington. 801 N. Quincy Street in Ballston is tall, but narrow, and houses a rehab center and an Indian restaurant on its floor level. (Photo: News-Press)

The layout for that square footage can take multiple forms.

Some examples Litkenhous pointed out that matched phase one’s square footage included 801 N. Quincy Street in Arlington’s Ballston neighborhood, which is seven stories high, but narrow, and has Capital Rehab Arlington and Urban Tandoor, an Indian and Nepalese restaurant, as floor tenants.
Another example is the office space that sits on top of Bar Bao, Spanish restaurant Pamplona and a Navy Federal Credit Union in Arlington’s Clarendon neighborhood.

This design is mostly one level for more prominent retail tenants until it consolidates into a larger structure at the other end of the block.

Currently, the office space for the West End project will be on the western side of the development’s entrance along Leesburg Pike.

Litkenhous doesn’t expect the City to model itself after the examples he gave, and once the second phase of the project begins to take hold several years down the line, he continued, the City will have room to modify the development’s scope, if they need to.

“No project of that size and that scale ever ends up being a perfect replica of what you envisioned when you started out on day one,” Litkenhous told the News-Press. “The 2nd phase may not deliver for quite some time, and I can assure you by the time they get around to even discussing starting that piece, the market will have changed again, and there may be some clarity and additional challenges.”

THE 3300 BLOCK of Wilson Boulevard in Clarendon is the other example pointed out by Litkenhous, which has night office space on top of night life attractions such as Bar Bao as well as necessities as Navy Federal Credit Union. (Photos: News-Press)

It’s all the adapting going on in the world right now that adds some new anxiety to the largest development in City history.

A third of the year has been spent working from home for those who were fortunate enough to keep their jobs following the pandemic’s major spread through the U.S. that started in mid-March. And with productivity maintaining, and in some cases exceeding, what was done at the office, it has prompted a reevaluation of whether a physical workplace is even necessary anymore.

The New York Times covered how multiple companies from around the country have navigated the transition to full remote work back in late June. Executives from Chegg and Cisco, both technology companies, said their employees had gotten more productive when taken out of the office environment.

However, executives at a public relations firm and software company separately said that they had seen dips in productivity. Primarily, as one Microsoft executive said, the concern was burnout from not having a division between work and home life.

It may come down to dollars and cents, too.

A study by the Cognizant Center for Future Work in May said companies stand to save $11,000 per worker by going remote, while workers could save up to $7,000 on wardrobe, transportation and childcare costs. It also, according to the study, is good at retaining employees, with 80 percent of workers surveyed by Cognizant saying they’d turn down a job without a work from home option. And the kicker: remote workers were found to be 13 percent more productive, per the study.

But Litkenhous countered by saying from studies he’s seen, people who are working from home are experiencing loneliness at higher rates, despite benefits such as not having to commute. As he puts it, a Zoom call can’t replace the human interaction that breeds innovation in the same way as the office environment does.

Bettarel added separately that Falls Church’s, and more broadly, Washington, D.C.’s track record when it comes to the office market should offer hope despite the public health emergency.

“Historically, the D.C. metro area office market has rebounded faster than other major metro areas following an economic downturn,” Bettarel wrote. “An important aspect to note is that the Falls Church office market was already rising in popularity pre-Covid and recent market analysis points to the continuation of this trend post-Covid. Additionally, smaller office buildings, such as the offerings planned for West Falls, may be more appealing to future tenants as they look to limit potential exposure.”

The bottom line, according to Litkenhous, is that the City delivers on its primary goal of making a high-class development that reaps significant fiscal returns for Falls Church.

If getting creative with how office space is structured is a means to reach that end, then Litkenhous said the City’s team and the developers plan will collaborate on that.