Falls Church News-Press Summer Real Estate Guide 2020

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FALLS CHURCH NEWS-PRESS | FCNP.COM

R��� E����� S����� 2020

Recent Of�ice Exodus Could Be Hurdle for F.C.’s West End Project

BY MATT DELANEY

SUMMER 2020 | PAGE 13

FALLS CHURCH 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

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. (S���������: N���-P����.) 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.

Continued on Page 14

INSIDE: Mission Lofts and Work-From-Home Lifestyle Come to Bailey’s Crossroads ���� 17 | F.C. Real Estate Market #s ����� 19-20

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PAGE 14 | SUMMER 2020

FALLS CHURCH NEWS-PRESS | FCNP.COM

TWO EXAMPLES of office spaces that come 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. The 3300 block of Wilson Boulevard in Clarendon 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)

Region’s Strong Pre-Covid-19 Office Market Shows Durability to Developers Continued from Page 13

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.”

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 midMarch. 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 mar-

ket 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 preCovid 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.

FALLS CHURCH NEWS-PRESS | FCNP.COM

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SUMMER 2020 | PAGE 15

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PAGE 16 | SUMMER 2020

R EA L E STATE A Falls Church News-Press Advertorial

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SUMMER 2020 | PAGE 17

Live & Work Lo�s Serve as Bailey’s Crossroads’ New ‘Gateway’

BY BRIAN INDRE

FALLS CHURCH NEWS-PRESS

The opportunity to work from home is not new, but since Covid19, many didn’t have a choice but to take their work home with them.

The new Mission Lofts living complex in Bailey’s Crossroads seemed to time its opening perfectly with the onset of the pandemic, and builds a natural division between working and living into its units.

Located right on the greater Falls Church-Arlington border, this new concept of a loft style community provides residents a flexible living space, workspace, or both. Mission Lofts is the second of its kind in the country, just after e-Lofts in Alexandria.

Both projects were developed by Robert Seldin, CEO and chief executive officer of Highland Square Holdings Development & Construction (2HSQ), which is based in Arlington.

Seldin’s concept came well before the novel coronavirus dominated headlines, with a vision that would provide hard-to-come-by office space and marry that with

MISSION LOFTS bring some yuppie-�lair to the Bailey’s Crossroads area, with a mural serving as a signpost and its dazzle-designed garage immediately next to it. (P����: N���-P����) all the safety and zoning regulations that could also double as living space. Both e-Lofts and the Mission Lofts use already existing buildings and convert them into

state of the art living/office communities.

“We all have learned how to work remotely from home, which is something the loft concept

had already figured out,” Mason District Supervisor Penny Gross said. “The design of Mission Loft units lends itself nicely to working from home with lots of natural

light and interesting places and angles to set up for virtual meetings.”

Bailey’s Crossroads was chosen for the location of Mission Lofts because there was a suitable building sitting empty as a result of the 2005 Base Realignment And Closure, or BRAC, that removed many defense contractors and offices from the area.

Gross had been contacted about repurposing the building, and after having been involved in the repurposing project for the Bailey’s Upper School (the first vertical urban school in the county), she knew that repurposing could be successful.

When asked if the pandemic is having a positive or negative impact on leasing the units, Gross said that since the development started before the pandemic, it seems to have attracted a lot of energy and interest.

With more empty buildings also vacated by the Department of Defense in the Skyline area, 2HSQ is already in the process of more development similar to Mission

Continued on Page 18

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PAGE 18 | SUMMER 2020

Complex’s Opening Coincides With Pandemic’s Work-From-Home Push

Continued from Page 17

Lofts.

“Mission Lofts is right at the gateway from Arlington into Fairfax County, so is perfectly positioned (without having to move a thing) to welcome new residents with a ‘kicky’ vibe,” said Gross. “The parking deck, which is original to the building, provides all the parking needed, and is painted with a ‘dazzle’ motif used for wartime ships, reflecting again the ‘mission’ concept of the building. The dazzle motif catches the eye and makes a ‘here I am’ statement.”

Municipalities have tried to steer development more towards easily accessible public transit, and for the Washington, D.C. area new complexes have sprung up around Metro stations. This results in places like Bailey’s Crossroads that are not rail served to be overlooked and unnecessarily devalued, which makes them right for redevelopment.

“We happen to like the Bailey’s area,” Seldin said. “We think that it is incredibly well located and, frankly, in a lot of respects, mispriced, considering how close it is to everything.”

Initial occupancy for Mission Lofts began in April of this year, right in the middle of the pandemic — which was not great timing. Seldin said about 20 percent has been leased so far, but that it’s picking up rapidly. He expects it to be full by the end of the year. So far, according to Seldin, a significant majority of people interested in leasing were specifically looking for a place that would facilitate working from home, which is a trend that’s been growing since 2010 and has now hit warpspeed with the virus present.

“An office building is really like a machine for storing information, and its value is that people have to travel to the building to get the information. For the past twelve or so years, most people have carried the sum total of human knowledge in their pocket with the smartphone, and that is what really started the trend away from the office,” said Seldin. “And obviously Covid-19 has really just brought more attention to it.”

Pre-coronavirus, many businesses and companies still

required workers to show up to the office daily, while instilling strict rules about working from home.

But now during the pandemic, work flexibility forced a change over night.

This change in work flexibility is most likely to stick around in one form or another even when things return to normal.

“What many may not realize is that the work from home order has really implemented the single largest collective mass code violation in US history,” said Seldin.

“Building owners and municipalities haven’t really focused on that issue yet, but at some point they are going to have to.”

Commercial use is not permitted in residential buildings, and working is a commercial use.

There are also zoning and code violations that can be violated simply by working from home.

Buildings that are built to commercial standards that are different from residential standards.

Commercial buildings require heavier floors for support, they require wider stairs because more people are allowed to use them, handicap requirements, water fountains, more parking, etc.

“If for example you were working in a residential building and somebody comes to your home office and requires handicapped toilets, and you don’t have that, then you just committed a federal crime,” Seldin said. He explained that if a residential building is damaged because it wasn’t built to withstand heavier loads coming from more people or filing cabinets, then you could be in violation of your insurance because you were using the building illegally.

“All of those things are a daisy chain of unforeseen events that really haven’t played themselves out either in the marketplace or through the legal system,” Said Seldin.

A shift in more people working from home will prove that real estate in its current form is completely out of phase with how people can do their jobs. This is a serious problem to Seldin, who also sees it as a significant opportunity.

Intrinsic demand in apartment leasing is down across the board, but one of the benefits to Mission Lofts is that it can lawfully be used for different purposes, and by having an increased number and

FALLS CHURCH NEWS-PRESS | FCNP.COM

types of people who can use the property makes it more insulated from the downturn. Seldin thinks that this is one of its strengths and that it can help to preserve communities.

With every unit having the options to be used however the tenant decides, the lofts offer a meaningful change to how real estate is normally understood and operated.

“Typically an apartment complex has a very limited pallet of uses with the customers there to serve the building’s needs, but in this concept we have flipped the paradigm and have put the customer first,” Seldin said. “So however it is they want the building to help advance their goals and objectives, we have the ability to help make that happen.”

GREEN SPACE is plentiful around Mission Lofts’ grounds. Outside of the front entrance (bottom), there’s a public seating area with communal tables as well as adirondacks in the lawn and a nearby grill. Along Columbia Pike, was formerly an empty parking lot has been transformed into a small park. (Photos: News-Press)

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FALLS CHURCH NEWS-PRESS | FCNP.COM

SUMMER 2020 | PAGE 19

Real Estate

Top Falls Church Home Sales

JANUARY-JUNE

#1 $2,049,500

#2 $1,825,000

#4 $1,787,119 #3 $1,800,000 Top 5 F.C. Home Sales October 1 – December 31, 2019 Address

BR #1 7104 Eastman Dr 7 #2 2312 Westmoreland St 6 #3 6549 Orland St. 7 #4 7306 Gordons Rd. 7 #5 2103 Greenwich St 6

FB

HB

6 7 5 6 5

2 1 1 1 0

List Price $2,149,000 $1,899,999 $1,775,000 $1,795,000 $1,725,000

Sale Price $2,049,500 $1,825,000 $1,800,000 $1,787,119 $1,749,000

Zip 22043 22046 22043 22043 22043

Date Sold 05/11/20 03/16/20 01/24/20 03/06/20 05/10/20

Source: MRIS, Inc.; Photos: MRIS, Falls Church News-Press

#5 $1,749,000

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PAGE 20 | SUMMER 2020

FALLS CHURCH NEWS-PRESS | FCNP.COM

Falls Church Area Housing Market — June 2020 Report Zip Code Area Median Price Number of Homes Sold

Average Days on Market

22046

City of Falls Church $928,384

10

22041

Bailey’s Crossroads

$433,212

25

8

22042

Sleepy Hollow

$628,565

54

14

22043

Pimmit Hills

$634,250

30

30

22044

Lake Barcroft

16

16

$663,250

17

Home Sales Vs. 1 Year Ago

Home Prices Vs. 1 Year Ago

Change in # of Homes Sold: June ‘19 vs June ‘2O

Change in Median Home Price: June ‘19 vs June ‘20

-56.52%

Change in Falls Church City (22046)

+3.26%

Change in Falls Church City (22046)

-19.35%

Change in Bailey’s X-roads (22041)

+3O.09%

Change in Bailey’s X-roads (22041)

+3.84% Change in Sleepy Hollow (22042)

+14.63%

Change in Sleepy Hollow (22042)

-3.22%

-5.75%

Change in Pimmit Hills (22043)

+53.34%

Change in Lake Barcroft (22044)

Change in Pimmit Hills (22043)

+60% Change in Lake Barcroft (22044) Source: Metropolitan Regional Information Systems, Inc. Copyright © 2020 Metropolitan Regional Information Systems, Inc.