Over the past 12 months I’ve been asked nearly a dozen times, what is the plan for the strip malls along Route 7? Some of the dealerships have already put in for rezonings, most notably the CARS submission of Dominion Square, but to date none of the retail strip malls have considered consolidating their parking for redevelopment. This is despite lagging lease rates on the aging retail spaces.
A prime example of this odd situation exists on the front door of the Greensboro Park Metro Station. Tysons Plaza, a strip mall best known for having a TJ Maxx and Staples, was built in 1968 when Tysons wasn’t much more than the original mall. The property was sold in 1997 for $31.3 million, and today is assessed at over $65 million. That assessed value does not represent its true market value should the current owner decide to sell all or parts of it.
With direct access to metro comes the ability to provide unlimited density per the Tysons Comprehensive Plan Amendment’s regulations. The only real constraints to this property is to respect the adjacent residential land uses in terms of overall height, as these are existing residential units, and avoiding negligent shadowing.
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Option A
With the amount of space available on the site, because of the excessive surface parking, it is possible to provide for a future extension of Boone Boulevard and therefore split the parcel into a two block wide swath. That means structures closest to Route 7 would remain nearly unrestrained on maximum heights, while the second block would allow a step down in height. Because of the existing open space screening even this second tier of buildings could still range between 150′ – 250′ without overpowering the adjacent parcels.
The existing retail center has over 160,000 square feet of retail. Each new block of development could accomplish 25,000 square feet of ground floor retail, and 50,000 square feet of ground floor retail if each space included interior mezzanines.
The initial conceptual 400+ mixed use tower located on the corner of Leesburg Pike and Gosnell could provide the entire existing parking quantity of the site with a 5-story structural garage while only affecting 10,000 square feet of the existing retail space, and can be built without effecting 90% of the surface parking during construction.
Once complete, the remainder of the parking lot could be redeveloped with an additional 3 high-rise mixed use buildings at any pace without impacts to site parking and without relocation of any existing retail during construction. Once 3 of these initial 4 high rises were complete, the entirety of the existing strip malls tenants could be relocated to the new buildings, allowing the remainder of the site to be fully redeveloped.
As part of the land deal with a site developer the current land owner could propose that any retail spaces that are created from the development be transferred to the original owner. In this way the existing site owner could upgrade his retail holdings, perhaps even expand them, create a more walkable neighborhood with built in customers above, all without spending any of their own money. At no point would the revenue of their property be reduced because they would be assured the same retail space (minus 10,000 square feet early on) at any point.
Additionally, they would be able to defer both the redevelopment design costs and tax assessment increases that would occur to the purchaser of the parcel, with a contingency that prior to the rezoning the land would remain in the hands of the original owner.
Option B
Perhaps the current parcel owner has greater ambitions to make a one time sale themselves. The property was purchased for $31.3 in 1997, but having 11+ acres in front of a metro station means the value is closer to $100 million in market value today, even without an upzone. With an upzone the price of each parcel could rise above $20 million based on the $24.2 million price tag on Greystar’s Ascent Tower property.
That would raise the total properties upzoned value to over $160 million, but would mean the current owner would have to pay the increased tax assessments which could mean more than $1 million cost per year, and would also require the current owner to pay for the rezoning application and design, with another 7-figure cost, possibly 8-figure cost.
This typical method of redevelopment has the drawback of leaving the original land owner locked out of his own property by the middle of the development process.
Summary
Redevelopment would provide between 200,000 and 300,000 square feet of retail. With heights next to the metro being limited to around 400′ it would provide over 1.6 million square feet of development (1750 dwellings if all residential) in total. If heights of the two buildings closest to the metro were allowed to be increased to 600′, the project would accomplish over 2.0 million square feet of development (2250 dwellings if all residential). This height increase could occur without even being visible to the adjacent neighborhoods because of the stepped nature of the two blocks.
Land development is an expensive business, most small retail property owners can’t come close to the financial capabilities required for building high-rise or even mid-rise projects, but they have the advantage of owning the property. That property is often wastefully arranged based on original suburban strip mall layouts which could be incrementally developed with negligible effects on existing tenants.