(Updated at 3:50 p.m.) When Arlington Economic Development tried to help a local tech business take advantage of a county tax incentive program some 2.5 years ago, it hit a snag.
The Commissioner of Revenue denied the company’s application to be recognized as a “qualified technology business,” per a county report. Under this designation, as part of the county’s “Technology Zone” program, it would have paid half the rate normal rate for the Business, Professional, Occupational License (BPOL) tax.
“Technology Zone” allows qualifying companies in Arlington’s “high-technology business corridors” to pay $0.18 per $100 of gross receipts for 10 years, as opposed to the $0.36 that many companies pay for a business license.
AED says the program is one of its “most effective tools” to recruit and retain tech companies, and a spokeswoman for the division tells ARLnow that 105 businesses have been approved for this designation since its inception in 2014.
After talking with the tax assessor’s office, AED learned the business was denied because it used a third-party organization, known as a Professional Employer Organization, to manage company payroll. It also learned “several” other businesses had been turned away for the same reason.
To qualify for the tax break, businesses must show, and the Virginia Employment Commission must verify, they increased their full-time employees by at least 25% within the 12 months before applying for the program.
“PEOs report a company’s employees and wages to the VEC under the PEO’s federal employer identification number, and the reports indicate that the employees are affiliated with the PEO rather than with the company,” said the staff report to the Arlington County Board. “This leaves the company unable to demonstrate employment growth to the County via its own VEC filing and therefore unable to meet the Technology Zone program’s criteria.”
This affects between four and six companies interested in applying for the program every year, AED spokeswoman Cara O’Donnell said.
Now, AED and the Commissioner of Revenue are asking the County Board to allow businesses that use these services to be eligible. The Board is set to review the request during its meeting on Saturday.
“The language does not align with current business processes and trends in the technology industry, specifically the increasing usage of third-party organizations to manage and process company payroll,” the staff report says, asserting that this is “inconsistent with the original intent” of the ordinance.
The proposed changes would also update the definition of “qualified technology business,” which the county says is “vague and outdated.”
County code currently says that a “qualified technology business” has a “primary function in the creation, design, and/or research and development of technology hardware or software.”
It adds that using computers, telecommunications services or the internet “shall not, in itself, be sufficient to qualify as a qualified technology business.”
But AED says this “does not capture many new business models” and recommend emphasizing proprietary technology instead.
Lastly, businesses would have 24 months, rather than 18, to apply to be “qualified technology businesses” after setting up a business in Arlington.
“The proposed amendments are minor technical changes to the ordinance language, not expansive policy changes,” the staff report says. “Together, these changes would enhance the effectiveness of the Technology Zone incentive as a business attraction and retention tool.”
Sponsored by Monday Properties and written by ARLnow, Startup Monday is a weekly column that highlights Arlington-based startups, founders, and local tech news. Monday Properties is proudly featuring 1515 Wilson Blvd in Rosslyn.
Last week, 15 entrepreneurs spent two days training in a business “bootcamp” hosted by the BizLaunch team of Arlington Economic Development.
They came from Arlington and around the D.C. area to learn how to use software to simplify business operations, file their taxes and learn how to market their product or service, among a host of other skills entrepreneurs have to figure out for themselves.
Realtor and Arlington resident Miranda Carter came to hone her business’ value proposition. She is preparing to launch a business building net-zero emissions, sustainably finished accessory dwelling units that may have a small footprint but don’t sacrifice luxury.
“For me, it’s been good at clarifying and filling in the blanks for things I haven’t thought through,” said Carter. “I knew I needed discipline, and this would force it on me to come back with a viable plan in two days. I know I’m one of those people who’ll have a good idea but won’t do anything about it. It forces me to take action instead of having a plan for five years. I’m hopeful this takes off.”
Carter, who has showed homes to potential buyers and undertaken environmentally sustainable home renovations for years, said the program helped her identify her target customer, refine her elevator pitch and learn how to track metrics.
Another attendee, Yvonne Tazem, spent two decades selling cosmetics before deciding to launch a Vitamin C serum that would work on her sensitive skin. It has since been featured in Vogue and she’s now working on a full line of products. She signed up to learn more about online marketing and also came away with some software she could use to simplify how she tracks online sales.
“I love the ability to give women the option to wear makeup or not,” she said. “Makeup should be a choice. You should be able to have beautiful, healthy, glowing skin without it.”
Carter and Tazem are examples of subject-matter experts who need help with running a business, said Alex Held, AED’s Small Business Manager and the event’s organizer.
“They come to us because they don’t know what they don’t know,” he said. “We help them avoid expensive missteps and start on the right foundation.”
Registration for the free event “sold out” in minutes due to the number of people who recently quit their jobs to start their own businesses, and are part of an ongoing economic trend dubbed the “Great Resignation,” said AED spokeswoman Cara O’Donnell. It was the first time AED has offered something like this in 15 years.
The two-day conference was funded with American Rescue Plan Act funding, but the plan is to make it a permanent offering from AED twice every calendar year. The economic development division partners with Boston-based Revby, which works with municipal and state governments across the country to help small businesses with marketing, online presence and finances. Read More
Urban farms and breweries could be coming to a vacant office near you.
Over the weekend, the Arlington County Board approved a series of zoning changes aimed at tackling the stubborn office vacancy rate. They would allow the following tenants to move into offices by right:
- animal boarding facilities, provided animals are under 24-hour supervision
- urban farms
- urban colleges and universities
- breweries, distilleries and facilities making other craft beverages, such as kombucha and seltzer
- artisan workshops for small-scale makers working in media such as wood or metal, laser cutters, 3D printers, electronics and sewing machines
Colleges and universities or urban farms previously needed to seek out a site plan amendment, which requires Arlington County Board approval, to operate in spaces previously approved for office or retail use.
The code requires all animal boarding, farming and artisan product-making activities to occur inside the building.
A county report describes this existing process as “overly cumbersome” for entrepreneurs trying to prove their business concept as well as for landlords, “who may be averse to take a risk on a new type of use that may require significant building improvements.”
The changes require farms, craft beverage facilities and artisan workshops to maintain a storefront where they can sell goods made on-site to walk-in customers, which the report says could reinvigorate dead commercial zones.
“Artisan beverage uses can bring new life to vacant buildings, boost leasing demand and, when located in a walkable neighborhood, can attract both existing and potential residents, while creating active third places for the community to gather,” the report said. “By fostering space for small-scale makers, artisans, and the like, a creative economy can grow, and people who may not have the space for such activities in their urban apartments may see this as an attractive neighborhood amenity.”
Some of these uses were allowed along Columbia Pike in the fall of 2021 to encourage greater economic revitalization. At the same time, D.C.-based animal boarding company District Dogs was appealing zoning ordinances curtailing the number of dogs it could board overnight in Clarendon, prompting discussions about expanding the uses approved for the Pike throughout the county.
The next spring, County Manager Mark Schwartz developed a “commercial market resilience strategy” aimed at bringing down the county’s high office vacancy rate, fueled by persistent remote work trends catalyzed by the pandemic. The tool, which includes an expedited public review process, was first used last fall to allow micro-fulfillment centers to operate by-right in vacant office spaces.
In a letter to the County Board, Arlington Chamber of Commerce CEO Kate Bates said the rapid approval of these commercial activities is critical for attracting new and emerging businesses.
“The Chamber believes that the Zoning Ordinance needs reform, and that unnecessary restrictions on commercial use should be removed to help the economy of the County grow,” Bates wrote. “In the wake of record high commercial vacancy, timely change is needed. It is imperative that the County focuses on long-term solutions for new business models, both through increased adaptability for new uses and expedited timeframes for approval of these new uses.” Read More
The old Transportation Security Administration buildings in Pentagon City, vacant and awaiting redevelopment, could get put to a new, temporary use.
Avis Car Rental is looking to add rental operations to the pair of offices and their underground garages at 601 and 701 12th Street S. The business, which currently has a location at 2600 Richmond Hwy, has filed two applications, one for each building, with the county.
The TSA announced in 2015 that it would be leaving its headquarters for offices in Alexandria after the expiration of the five-year lease it signed in 2013. That stalled and amid the pandemic, the agency switched course and instead moved to Springfield, opening its headquarters in 2021.
At the time of the announcement, Arlington was coping with relatively high office vacancy rates driven in part by the departure of major tenants — including the U.S. Fish and Wildlife Service and the National Science Foundation — in search of cheaper leases.
After a dip down, the pandemic hit, sending the office vacancy rate even higher, where it has remained due to lasting remote work trends Covid catalyzed.
Avis proposes an alternative use until the owner of the office buildings, Brookfield Properties, razes these towers and builds four new towers with a mix of residential, office and retail uses. Brookfield’s redevelopment plans, first filed in 2019, are currently on hold.
“The proposed Vehicle Rental Use will further Arlington County’s goals and aims for a resilient commercial market,” attorney Matthew Weinstein, representing the car rental company, wrote in an application. “The Property is currently operating as a vacant office building until future redevelopment. The Vehicle Rental Use will improve existing conditions by activating space that would otherwise remain vacant for the short to mid-term. Moreover, the Vehicle Rental use will benefit the National Landing area by allowing customers arriving at National Airport to have a reliable and efficient option for renting vehicles during their visit to the Washington, D.C. area.”
Avis plans plans on using 50-250 spaces daily per garage, but is leasing some 922 parking spaces between the two TSA buildings to have extra space “depending on the operational needs,” such as handling overflow from other facilities, Weinstein writes.
Customers will access the facility from the lobbies of both buildings, where there will also be service counters. Avis plans to serve customers and rideshare drivers and rent an estimated 40-50 vehicles per day. The proposed hours of operation are 7 a.m. to 7 p.m., seven days a week.
“The Applicant’s vehicle rental facility network works cohesively to ensure each rental facility is meeting customer demands and the Applicant’s operational needs. This means that at certain times each vehicle rental facility in the Applicant’s network will back up and supplement each other depending on demand and operational requirements.”
Meanwhile, plans to redevelop the TSA buildings have been on hold since 2020, at the request of Arlington County planners, Brookfield previously told the Washington Business Journal. At the time, they were working on a new sector plan to guide future development in Pentagon City.
The plan that was in place when Brookfield filed preliminary redevelopment plans reached the end of its useful life in light of Amazon’s second headquarters. Despite some vocal opposition, the Arlington County Board approved a new plan that focuses on residential infill development and “ribbons” of tree- and plant-lined walking paths.
Brookfield did not return a request for comment about an updated timeline for redevelopment.
In another bid to tackle the soaring office vacancy rate, Arlington County is mulling whether to fill vacant offices with unconventional tenants such as breweries and hydroponic farms.
The county is looking at allowing urban farms, artisan workshops, and craft beverage-making and dog boarding facilities to operate by-right in commercial, mixed-use districts throughout Arlington County. Some of these uses are already allowed along Columbia Pike.
Now above 21%, the office vacancy rate in Arlington spells lower tax revenue and belt-tightening for the under-development county budget. It ticked up during the pandemic and remained high even as buildings reopened, mask mandates were lifted and people returned to the office.
As the trend persisted, Arlington County Manager Mark Schwartz and his staff launched a “commercial market resilience strategy” to get new types of tenants moved in quickly. The strategy focuses on zoning changes with a limited impact on neighbors that can be approved with through a new, less involved public engagement process. The strategy was first used last fall to approve micro-fulfillment centers.
Last night (Wednesday), a majority of the Arlington County Planning Commission approved a request to authorize public hearings on this proposal.
“We do need to be thinking creatively,” said Planning Commission Vice-Chair Sara Steinberger. “I’m appreciative that the county came forward with a streamlined approach so we can start fast-tracking some things. The community feedback and involvement is essential and is a cornerstone of the Arlington Way and how we comport ourselves within this community. That said, it’s never fun to be bogged down in bureaucracy either, so when there is an opportunity to move more quickly on certain things in a limited field, I think it’s appropriate to do so.”
The proposal also would let colleges and universities, which can currently operate in offices only after obtaining a more burdensome site plan amendment, move in by right.
“They tend to be our strongest source of demand in office buildings at a time when we aren’t seeing much demand,” Marc McCauley, the director of real estate for Arlington Economic Development, told the Planning Commission.
Commissioners Stephen Hughes and James Schroll abstained from the final vote, reprising concerns they raised last year about the impact of these new uses on neighbors. While voting for the proposal, Commissioner Tenley Peterson questioned county staff about potential noise, smell and parking nuisances.
“I can see the good reasons for doing this,” Schroll said. “My reticicene is not necessarily what you’re doing on the zoning side, it’s more the outreach. There are some things that I feel like aren’t fully thought through… We’re pursuing these without fully understanding what use standards we need to put in place.”
Citing “incessant barking” from nearby dog-boarding facilities that can be heard from Jennie Dean Park, Hughes said he wants the community to understand that these changes would leave nuisance mitigation up to the condition of the building and county noise ordinances.
“There is no place in the entire county where your actions do not impact another person,” Hughes said, pushing staff to instead draft a document listing “externalities we can all agree to as a community that we will not do.”
Update on 11/29/22 — From the announcement:
Governor Glenn Youngkin today announced that Technomics, Inc., an employee-owned decision analysis company that specializes in cost analysis, data management, and data analytics, has invested $1.7 million to expand in Arlington County. The company is leasing an additional 10,000 square feet of space at 1225 South Clark Street to increase capacity. Virginia successfully competed with Maryland, DC, and California for the project, which will create 150 new jobs.
Earlier: Top state officials are coming to Arlington tomorrow for an unspecified “economic development announcement.”
“The Honorable Glenn Youngkin, Governor of the Commonwealth of Virginia, will join Arlington Economic Development and other state and local economic leaders on Tuesday, Nov. 29, 2022, for an economic development announcement,” Arlington County said in a media advisory today.
Joining the governor and local officials will be Caren Merrick, Virginia Secretary of Commerce and Trade, as well as “leaders in Arlington’s technology and business community.”
The event is taking place Tuesday afternoon at 1225 S. Clark Street in Crystal City.
It is unclear what exactly is being announced. Arlington has been on a bit of a roll with landing major corporate headquarters, including the Nestle U.S. operations in 2017, Amazon’s HQ2 in 2018, and — this past summer, in successive months — aerospace and defense giants Boeing and Raytheon.
There have also been other notable developments specific to the Crystal City, Pentagon City and Potomac Yard area — collectively known as National Landing — in the areas of higher education (Virginia Tech’s Innovation Campus) and connectivity (a plan for ubiquitous 5G).
In June the governor announced in Arlington that Boeing was partnering with Virginia Tech on a “$50 million facility for military veterans transitioning to civilian life” at the new Innovation Campus, which is being built in the Potomac Yard area of Alexandria.
Arlington has been combatting a rise in office vacancies exacerbated by the pandemic and work-from-home trends.
Sponsored by Monday Properties and written by ARLnow, Startup Monday is a weekly column that highlights Arlington-based startups, founders, and local tech news. Monday Properties is proudly featuring 1515 Wilson Blvd in Rosslyn.
Arlington County held its first-ever awards ceremony last week to honor fast-growing startups headquartered in the county.
The ceremony recognized companies that have experienced substantial growth in revenue, employment and venture capital — “REV Awards” for short.
“The REV Awards were created to celebrate the innovation and perseverance in Arlington’s business community,” said Michael Stiefvater, the Acting Director of Arlington Economic Development Business Investment Group, in a statement.
Companies were categorized based on their revenue, staff size and fundraising rounds completed to ensure fair matches.
“The eight winning companies exemplify these traits as leaders in their respective industries and we are proud that they call Arlington home,” Stiefvater said.
The winning companies, most of which ARLnow have previously featured, include a number of companies that orbit the Department of Defense and national politics, providing everything from cybersecurity to data analysis to consulting work.
But there are some newer companies that break that mold, founded after the defense department closed dozens of government offices after the 2005 Base Realignment and Closing Act.
Revenue
- Under $5 million: Franklin IQ
- $5-$15 million: C3 Integrated Solutions
- $15-$25 million: Black Cape
- $25+ million: PGLS
Employment
- Under 100 employees: Shift5
- Over 100 employees: Targeted Victory
Venture Capital
- Early-stage: EarthOptics
- Late-stage: Federated Wireless
Ballston-based consulting firm Franklin IQ (901 N. Glebe Road)– a Service Disabled Veteran Owned Small Business founded by a former Marine — mostly works with defense industry and federal healthcare clients. During the pandemic, it leaned into its veteran roots and helped about 600 veteran health clinics move their in-person visits online, and provided expertise to the Department of Veterans’ Affairs on PTSD treatment, sexual assault response and prevention and suicide prevention.
For the third consecutive year, Clarendon-based IT company C3 Integrated Solutions (3033 Wilson Blvd) landed on the Inc. 5000 list of fastest growing private companies, ranking 1,544th in the U.S, 63rd in Virginia and 88th among IT Management companies. It reports a 414% growth over three years, during which time it pivoted temporarily to helping defense contractors comply with new government-issued cybersecurity regulations.
Ballston-based, veteran-owned data intelligence company Black Cape (4075 Wilson Blvd) landed a spot this spring on a five-year, $241.6 million contract to improve how the Department of Defense uses its vast data resources for missions. The company emerged from “stealth mode” in 2019 and, based on its revenue growth since then, is the sixth fastest-growing company in the D.C. area, according to the Washington Business Journal.
Ballston-based, minority-owned PGLS (1010 N. Glebe Road) provides multilingual translation, interpretation and language training solutions in over 200 languages and dialects. Nine years after its founding in 2013, the company ranked No. 461 on the Inc. 5000 list, as well as No. 40 in the business products and services industry and No. 14 in Virginia.
Shift5 in Rosslyn (1100 Wilson Blvd) has rapidly amassed $70 million in funding over the last 12 months to hire staff, expand its headquarters and develop its products. The company appointed its first Chief Financial Officer, Robert Sison, in October, and in June, it was recognized for its high sales rate and commitment to the public sector. The company has been sounding the alarm on rising cybersecurity threats to the nation’s planes and trains.
Feeling the pressure to respond to its soaring office vacancy rate, Arlington County is looking to fill empty buildings quickly.
One option for adding tenants and knocking down the 20.8% vacancy rate would be to permit companies to set up small warehouses, or micro-fulfillment centers, inside of office buildings that are struggling to attract new tenants — especially as remote work appears here to stay.
The proposed solution is part of a new initiative to modernize and add flexibility to the county’s zoning approval process. In addition to micro-fulfillment centers, this plan suggests a few other non-traditional uses for office buildings, from breweries to urban farms. It also provides an expedited public process with shallower community engagement so that the Arlington County Board can sign off more quickly.
“The goal of this different approach for new or amended uses is to have them ready for board consideration more quickly than other typical zoning studies,” said Jill Hunger from the Dept. of Community Planning, Housing and Development (CPHD). “This is the first application of the county manager’s strategy to ensure commercial market resiliency.”
After a discussion that called out county staff for not engaging enough with the community, all but one member of the Planning Commission voted to send the amendment to the Arlington County Board for approval on Monday. Commissioner Stephen Hughes abstained.
The proposed zoning change limits each micro-fulfillment center to 10,000 square feet, reflecting industry best practices and staff discussions with center operators, Hunger said. If the center is in a ground-floor space and opens onto an active street, it must provide a walk-in customer sales area.
Staff recommend that no fewer than 10% of deliveries should be made by a delivery worker on foot or on a bicycle.
“It’s anticipated that quite truthfully after the initial startup, and if more than one micro-fulfillment center operates in Arlington, this modal split may actually increase,” Hunger said.
While Planning Commission members ultimately voted in favor of permitting micro-fulfillment centers, a number criticized the plan for not talking to the civic associations that could be impacted.
According to a draft county document, the county placed public notice ads with the Washington Times for the Planning Commission and County Board meetings, updated its webpages for zoning studies and its response to office vacancies, and briefed the Planning Commission and the Economic Development Commission.
“We feel we have done the outreach that’s consistent with many zoning text amendments,” Hunger said.
But without asking residents for their input, Commissioner James Schroll said he has a hard time believing the County Board can approve the change without additional public hearings. The Board is expected to take up the matter at its Saturday, Oct. 15 meeting.
“How we do what we do matters,” he said. “I get that you want to move quickly and I support that and I also want staff to be engaging with broad stakeholders as you do that.”
He said he’ll be reticent to support future amendments to consider permitting breweries and urban farms in office spaces, for instance, if there isn’t more stakeholder outreach.
(Updated 11:20 a.m.) Arlington has the second highest work-from-home rates in the nation, U.S. Census Bureau data from 2021 show.
The county falls just behind Fremont, a city in California’s Silicon Valley that is home to numerous tech companies, while D.C. ranks third. And within the metro D.C. area, the remote work population in northern Arlington specifically is second in size only to the central and downtown parts of the District.
People who study these trends, like Economic Innovation Group economists Adam Ozimek and Eric Carlson, say Arlington’s high ranking does not surprise them. They analyzed data on remote work for ARLnow, comparing the 46 commuting zones that make up the D.C. area.
At 55%, “North Arlington has one of the highest work-from-home rates in the D.C. region,” said EIG Chief Economist Ozimek. “Even South Arlington does pretty well in terms of the region overall, 43% is high overall, even though the income divide you can see.”
Looking at five-year population estimates, they found that the D.C. area as a whole topped the charts with a 34% telework share overall, followed by San Francisco (33%) and Austin (32%). San Jose and Seattle came in fourth and fifth, and much larger cities, including Chicago and New York City, ranked 18th and 20th with teleworkers comprising around 23% of the workforce.
“The D.C. area is just about as work-from-home as we would expect based on underlying factors,” Ozimek said. “Higher-educated places have more work from home. More expensive places have higher rates of working from home. And occupation matters: you’ve got a lot of skilled workers in general. The more skill, the more likely it is to be remote.”
Arlington, he said, has some of the highest average home values and education levels in the region. In addition, nearly half of jobs in the D.C. area can be done remotely, compared to other parts of the country, like Las Vegas and Grand Rapids, Michigan, where 30% or fewer jobs can be done remotely, they found.
While the pandemic precipitated this pivot to remote work, working from home — at least a few days a week — appears to be settling in as a permanent fixture of how many Arlingtonians get their jobs done.
And that is impacting Arlington County’s record-high office vacancy rate, which reached 20.8% during the second quarter of 2022. The county generates 45% of its property tax revenue from taxes on commercial properties like office building, helping to fund Arlington schools and county services while taking some of the pressure off of homeowners.
The office vacancy rate is higher now — with masks no longer required and vaccines and boosters readily available — than it when the pandemic first took hold (16.6%) and at the beginning of 2021 (18.7%).
“The challenges are really deep,” County Manager Mark Schwartz told the County Board last week. “Long-term leases are becoming rarer. To ask people who used to come to the office five days a week to do so again… might not be met with universal acclaim from those who used to drive into the office five days a week.”
As commercial and office vacancy rates continue to soar, the county is looking to food delivery staging areas, urban farms, breweries, and small warehouses as potential solutions.
At last week’s Planning Committee meeting, county officials expanded upon a County Manager initiative first announced in April to modernize, simplify, and add flexibility to the county’s zoning approval process. The efforts are being called “commercial market resiliency.”
The last two plus years have seen a lot of change in terms of how commercial space is used, said Jill Hunger from the Dept. of Community Planning, Housing and Development (CPHD).
“We are experiencing rapid shifts, a lot of it was accelerated [due] to Covid,” Hunger said. “Where and how we work have changed as well as general consumer behavior and expectations.”
This has led the county to consider less traditional uses of spaces that could be approved quickly, like micro fulfillment centers (small-scale warehouses), maker spaces, data centers, animal boarding, urban agriculture, and breweries.
These types of uses would require, according to a presentation by CPHD, only “minor tweaks” to already-approved zoning uses and, in some cases, are already allowed in neighboring jurisdictions. Another advantage is that these types of uses could also be approved within six months, which is considered a quick timeframe.
By more quickly approving a larger variety of commercial uses, it could help bring down commercial and office vacancy rates that have hit nearly 21%.
“We are still facing tremendous headwinds, especially with commercial office vacancy,” said Marc McCauley, Arlington Economic Development’s (AED) director of real estate development. “[There’s] uncertainty of when people are returning to the office and how they are going to use the space differently.”
Nearly half of Arlington’s local property tax base comes from commercial properties, which helps to keep taxes on residential properties lower than would otherwise be needed to provide the current level of local government services.
AED told ARLnow earlier this week that the department is continuing to work on reducing commercial and office vacancies.
As was noted several times during the Planning Commission meeting, the proposed changes would be similar to those that were approved for Columbia Pike late last year.
In November, the County Board approved changes allowing for more retail variety on the ground floors of buildings along Columbia Pike. This might lead to businesses more often seen in industrial districts, like a brewery, distillery, or a shared commercial kitchen opening on the Pike.
“We started out hearing that Columbia Pike was unique but what we heard from a lot of [people], including this commission, ‘why isn’t this good for everywhere?'” said Marc McCauley of AED.
To this end, CPHD is looking to institute a pilot program that would allow micro-fulfillment centers, where all deliveries would be by bike or foot, to quickly move into these commercial spaces.
The hope is to go through the approval process in four months, starting with a request to advertise this month, so that this pilot would come before the Planning Commission and County Board for final approvals in October.
As the county, region, and nation continue to grapple with how the pandemic impacted office vacancies and changed the economy, officials are realizing the old ways of approving commercial uses may no longer work.
“What we are trying to achieve is… when we are building spaces and suggesting different uses that we are not precluding anything,” said Hunger. “We are trying to be more inclusive and not exclusive about what can and can not go in.”
The pandemic and work from home trends are causing pain for owners of office buildings in Arlington and across the region.
Arlington’s office vacancy rate reached 20.8% this month, according to data from CoStar, as relayed by Arlington Economic Development. That’s up from 16.6% at the beginning of 2020, as the pandemic first took hold, and 18.7% at the beginning of 2021.
Arlington two main office submarkets, meanwhile, are seeing even higher vacancy rates. The Rosslyn-Ballston corridor’s office vacancy rate rose to 23.3% and that of National Landing (Crystal City and Pentagon City) rose to 24.4% as of the second quarter of 2022, according to new data from commercial real estate firm Colliers.
“The trend of rising vacancy and falling demand in the Northern Virginia market continued during the second quarter,” Colliers said in a report. “Vacancy rates reached 19.0 percent and over a million square feet of space has been returned so far in 2022.”
That’s despite some positive developments, like the renewal of Accenture’s 120,687 square foot lease at 800 N. Glebe Road in Ballston, the company said. Likewise, recent news of Boeing and Raytheon moving their corporate headquarters to Arlington are likely to mostly be moral victories for the county, as neither company is believed to be leasing any significant amount of additional office space.
Colliers noted that the highest-end office space (“Class A”) had the highest total area of additional vacancy. It also noted that a significant amount of office space is currently under construction in Arlington — though much of that can be attributed to Amazon’s forthcoming HQ2 in Pentagon City.
Demand in Northern Virginia fell for the third consecutive quarter returning 522,850 square feet of space to the market. In the second quarter, Class A product was the largest contributor to the negative demand, with 385,327 square feet of negative net absorption. The combined Class B and C product also registered negative demand, returning 137,523 square feet to the market. Subsequently, overall absorption figures for Northern Virginia in the first half of the year reached negative one million square feet.
[…] At the end of the quarter, just under four million square feet of construction was underway with half of that future inventory in Arlington County. This is down from the recent peak of over five million at the end of 2021.
On its face, high office vacancy rates might not seem like a problem for those living in Arlington, but in reality it could raise costs for residents. That’s because nearly half of Arlington’s local tax base comes from commercial property and more vacancy means less tax revenue for the county, which in turn puts pressure on residential property owners to make up the difference — or accept lower levels of local government services.
Arlington Economic Development, which helps to promote the county to potential office tenants, tells ARLnow that it is working to reverse the current trends.
“The commercial office market is an important component of the Arlington County tax base, which leads Arlington Economic Development to closely monitor vacancy trends and proactively direct resources to attracting and retaining businesses in Arlington,” the department said in a statement. “The COVID-19 pandemic has significantly altered the way businesses operate, particularly those in an office environment, and the elevated office vacancy rate across Northern Virginia is an indicator of this change.”
More from AED:
AED is committed to further reducing the office vacancy rate through a multi-faceted approach, including the following three areas:
- Targeted business attraction and retention efforts within our key industries to bring new operations to Arlington and support existing operations expand within the County
- Cultivating and catalyzing the local entrepreneurial ecosystem to further produce homegrown startups that mature into larger companies using more space.
- Enhanced regulatory flexibility that will expand the number of allowable uses within commercial buildings and quickly adapt to economic and market shifts.
- AED is pursuing this area In collaboration with the Department of Community Planning, Housing and Development and other County stakeholders.
AED is confident that communities like Arlington with a skilled workforce, flexible and proactive policies, and a high quality of life will be well-positioned to capture growth in the coming years.
Colliers, meanwhile, says it’s difficult to predict what will happen with office space down the road, though for many companies the days of bringing every employee into the office five days a week may be a relic of pre-pandemic times.
