Arlington’s economic development efforts may need to do more with less over the coming year.
“This is a budget [year] that is very lean. There’s going to be a lot of discussion about that,” acting Arlington Economic Development (AED) director Kate Ange said at the Feb. 10 Economic Development Commission meeting.
AED’s budget for the current fiscal year is just under $10 million, with about $3 million designated for cultural affairs programming that falls under its authority. The remainder, about $7 million, is for general economic development efforts.
County Manager Mark Schwartz will release his fiscal year 2027 budget proposal in the coming weeks. A final budget is slated for County Board approval in April.
That process will result in “a discussion about the tradeoffs of how we keep doing the work we do, given constrained resources,” Ange said.
Ange was tapped as acting director of the department in October, after AED director Ryan Touhill departed for a position in Arizona.
At the Feb. 10 meeting, commission member Kate Bates, CEO of the Arlington Chamber of Commerce, said commission members “certainly understand it’s a tough budget year.”
But that shouldn’t stop the panel from pushing for the resources needed to promote economic development initiatives, Bates said.
The county’s office-vacancy rate continues to hover around 24%, the highest in the region. Ange acknowledged that “the pure square footage in office [space] that is in Arlington today is probably too much for what future demand is going to be.”
In 2025, owners of seven commercial office buildings received approval to convert a total of 1.75 million square feet of office space into nearly 1,200 residential units and almost 350 hotel rooms.
That has the benefit of removing vacant office inventory. But it also is pushing more of the county’s total assessed property valuation onto residential properties, which continue to see valuation growth.
Between 2025 and 2026, in contrast, the assessment of office buildings countywide dropped 19%, largely due to lower sales prices and fewer tenants.
Where once the county relied on a 50/50 split between residential and commercial valuations, the 2026 ratio is 57% residential, 43% commercial. Because commercial properties tend to require fewer government services than residential ones, changes to that ratio have major effects on government operations and tax rates levied on property owners.
Neighboring Fairfax faces similar challenges
Arlington is hardly alone in the D.C. area in attempting to win leasing deals and embrace adaptive reuse in a competitive marketplace.
At a recent committee meeting of the Fairfax County Board of Supervisors, Fairfax leaders pressed for a more hands-on approach in helping owners repurpose aging commercial properties.
“We know where they are. We have this information. Let’s identify the top 10, 15 opportunities and let’s go to them,” Board of Supervisors Chairman Jeff McKay (D) said at the Feb. 10 meeting of the supervisors’ Economic Initiatives Committee.
In 2025, more than a million square feet of outdated office space was removed from use, either through redevelopment or repurposing for alternative uses, Fairfax County Economic Development Authority (FCEDA) staff told supervisors at the meeting.
While this is trending in the right direction, county officials need a more “aggressive approach,” McKay said.
The effort, to be rolled out at next Tuesday’s (Feb. 17) Board of Supervisors meeting, is likely to focus on segments of the office market with the highest vacancy rates.
Currently, the “trophy” office segment has a relatively low 12.3% vacancy rate. Class A space, the next highest quality, had a vacancy rate of 20.6%, while Class B/C space had a vacancy rate of 26.8%.
Fairfax Supervisor Dan Storck (D-Mount Vernon), who chairs the economic initiatives committee, said the county was well-positioned to build partnerships in filling office space.
“We’re going to be able to capitalize on the opportunities,” Storck said. He said Fairfax was continuing to “demonstrate remarkable resilience” despite headwinds.
McKay said that while Fairfax County tried to be a good regional partner, its efforts needed to be focused on meeting its own challenges.
“Our first priority is the county,” McKay said, expressing hope that Fairfax County will see rebounds “quicker than anyone else in the region.”
The Fairfax County Economic Development Authority is headed by Victor Hoskins, who used to fill a similar role in Arlington.
