Our region’s tallest building is in Rosslyn, and it has been vacant since the day it opened in 2013. That’s because construction started during a time of economic prosperity but wrapped up during a downturn.
The building at 1812 North Moore Street is 390 feet tall— for comparison, the Washington Monument is 555 feet.You’d think that being right next to the Rosslyn Metro stop (which is also a bus hub) would make this 35-story building an ideal spot for all kinds of commercial tenants.
The problem is that from the time Monday Property and Goldman Sachs teamed up to develop the building in 2010, they never found a an organization to take on most of the lease, otherwise known as an “anchor tenant.” It’s ideal for commercial buildings to have anchor tenants before groundbreaking to guarantee a financial return on the building, and to help bring in other tenants.
The developers proceeded to build without an anchor tenant because at the time, our region’s economy looked like it had successfully weathered the “great recession” thanks to stimulus funding and the reliability of government jobs. Monday and Goldman Sachs figured that even if a tenant wasn’t lined up yet, they were sure to find one.
But the same year that 1812 North Moore got started, the region’s job market started declining, which led to several large companies (Northup-Grumman, for example) and government agencies leaving Arlington. That included the federal government moving thousands of military jobs from Crystal City to the Mark Center, and eliminating others during sequestration. That created a glut in Arlington’s office market that’s taking a long time to fill.
Rosslyn’s office vacancy rate tripled from 10 to more than 31 percent between 2011 and 2014, and 16 government defence agencies left Arlington County between 2005 and 2015. In 2015, the vacancy rate in Arlington was close to 21 percent, which was a historic high (DC never went above 12 percent).
What’s keeping this building vacant? Here are a few reasons
Although the vast majority of office tenants these days want to be near Metro stations, downtown DC and Tysons Corner are competing much more strongly than they used to, making it harder for places like Rosslyn or Crystal City to fill office space. Downtown DC no longer suffers from negative image it had in the 1980s or 90s, and thanks to the Silver Line, Tysons Corner is in the game like never before.
(On a related note, buildings in Tysons will soon take the “tallest building in the region” crown.)
Also, eschewing the basic concept of supply and demand, the building’s owners have not reduced their asking price for tenant leases, at least not as of late 2015
A final reason could be that though the economy has regained much of its steam from the 2008 downturn, the new economy is a lot different from the old one. More people are self-employed or work non-office jobs than before, and thanks to teleworking and increasingly paperless office environments, even large office-using employers fill less office space per worker than they used to. The farther you get from the DC core, the less demand there is for office space per capita in 2016 as there was just a few years ago.
Short of finding a tenant that wants to move in, 1812 North Moore will likely either need to cut its leasing price or sell to another investor.