Commentary: Accenture’s Departure: Harbinger of Future Reston TOD Office Markets? Terry Maynard, September 20, 2011

I was surprised by the recently announced departure of Accenture’s headquarters from Reston Town Center, but maybe I shouldn’t have been.  Accenture is among the world’s leading management consultant firms in the high technology “knowledge” industry.  More than most firms, it focuses on future trends and best practices in cost-effective and productive management in technology companies. 

As its decision to leave Reston Town Center suggests, Accenture apparently practices what it preaches.

One of the trends that Accenture’s headquarters was noted for in Reston was not assigning office space to its new employees.  As Jeff Clabaugh reports in the Washington Business Journal (WBJ), “Accenture has been ‘office hoteling’ for the last several years, meaning workers don’t have assigned office space anymore.  Instead, employees, many of whom spend much of their time off-site with clients or working from home, share space in Reston, using a reservation-based system for use of office space.”  These employees remain connected to Accenture through their laptop computer and access to Accenture’s private network.  In my view, this practice had at least two positive effects from Accenture’s perspective:  It keeps Accenture’s employees in close contact with the company’s clients, and it reduces the amount of space Accenture needed to lease for its headquarters—and, therefore, business expenses.   With computing and networking technology improving steadily, I doubt there are many down sides to this space management strategy. 

As it turns out, Accenture has been downsizing its Reston headquarters staff anyway, according to WBJ, and with its move to Arlington’s Ballston Metrorail station area, cutting its rental space roughly in half from nearly 200,000SF to 100,000SF.  “’Because of the virtual nature of our office environment, we no longer need the amount of space we have in Reston,’ said Accenture spokesperson Kate Shenk,” reports WBJ.  

It may also be true that Accenture is positioning itself for leaner times as the federal government tries to cut its spending, especially in defense-related spending—a mainstay of the Washington area office market and Accenture’s local client base.   Besides the downsizing, the move gives Accenture immediate access to Metrorail for its employees enabling them to commute to Accenture’s headquarters and visit Accenture’s clients easily and inexpensively.   And I can’t help but believe that, in the end, Accenture will pay no more rent per square foot—and possibly less—than it is now paying in Town Center in these exceptionally competitive times for commercial leasing.

The key question:  Is this is an anomaly or an indication of a long-term office market trend? 

I would submit that Accenture’s move is a harbinger of the high-technology office market of at least the first-half of the 21^st Century—and that’s what we have and will continue to have in the Dulles “technology corridor.”   Its key features will likely be:

• Major increases in the use of the “virtual office” concept to cut costs.
• Fast, easy, and reliable access anytime to key business clients, partners, and others
• Recognition of the changing demographics and related living preferences of employees.

These trends reflect acknowledgement at the corporate level of what has been occurring incrementally in the nation’s workforce for over a decade. 

While Accenture speaks in terms of a virtual office for its employees, the corporate virtual office is the logical extension of an ongoing trend to make greater use of independent contractors who work from their homes or elsewhere when needed.   Again, there are cost reductions for the corporation in most circumstances while giving it access to the right expertise at the right time without apparent long-term employment commitments.  And it gives the expert independent contractor greater flexibility to do what s/he wants and the time and place of his/her choosing without corporate bureaucratic hassles, often while earning more than as an employee, even with greater job uncertainty. 

A legitimate counterpoint to this argument is the highly classified nature of much of the high-technology work that occurs around Washington that, by regulation and even common sense, must take place in tightly secured facilities.  Things get stolen from homes, and laptops are lost on subways and buses.  Still, steps are being made—albeit glacially—to allow a greater range of classified work to be conducted from home, as I have personally experienced.  And the greater use of securely encrypted laptop computers and phones, secure networks, and high-level home physical security systems will facilitate this trend in the future.   And those who must go to an office to work usually go to government-owned facilities of the nation’s security departments and agencies—their client’s spaces— not to commercial office space, even space with upgraded security.  Still, it is unlikely that the most highly classified defense and intelligence work will be allowed to be conducted outside a secure facility for decades. 

Getting up close and personal with a company’s clients has become a mantra for the high-technology service industry, and business results have demonstrated the validity of the mantra.  If a company wants to win the next big contract, it has to be intimately familiar with its prospective client’s needs and recognized not only as a company that provides exceptional products and services for reasonable prices, but one with which the client has a close—almost personal—trusting relationship.  Part of being close to your client is, well, literally being close to your client’s decision makers with a physical presence as well as regular digital contact.  So why should companies rent space in the outer Washington suburbs—even ones with a technology bent, decent transportation, and smart people—when they can be closer and have the same technology, transportation, and personnel environment, such as in Ballston?  Even if a company’s defense clientele has been BRAC-eted, most companies are probably closer to Ft. Belvoir from a time perspective in Arlington than in the Dulles Corridor (except possibly at Tysons)—and Metrorail won’t help.

Finally, the nature of households and their dwelling preferences are changing.  Increasingly, families and households are smaller—1, 2, or 3 people—with an acceptance if not a preference for higher density housing such as high-rise condos and apartments.   The key demand of people living in these environments is that they have easy walking access to all their key household needs—markets, restaurants, pharmacies, other shopping, cultural and recreational facilities, and open space—and they have reliable, clean, safe, frequent public transportation to the places they need to go beyond their immediate walkable area.   These are the essential characteristics of a transit-oriented development (TOD) area.  

These characteristics stand in contrast to the 3, 4, 5, and more person households and families that have grown ever farther out in the suburbs since WWII who will drive substantial distances to meet their needs.   While the argument has been made that those now satisfied with their high-density living will soon seek a lower density suburban lifestyle, recent demographic trends simply do not support that view.  Census data shows that households are becoming smaller than they were a decade or more ago at just about every decennial age bracket—and there is no substantial evidence that trend will reverse itself.   And for those who do wish to move from a high-density to a lower density residential climate, the stock of suburban low-density homes appears large enough that few new suburban homes will be needed anytime soon.   If there becomes a shortage homes, it will more likely occur in high-density TOD residential neighborhoods over the next decade or two at least. 

So what?

If the above is generally accurate, it suggests that the Dulles Corridor will need more residential development and less commercial office space development than it is currently planning.  The new Tysons Comprehensive Plan calls for 2/3 of developed space to be commercial office space and the balance—less hotels, retail, and other small categories—to be residential, a 2:1 office: residential space ratio.  And most of that residential space will be beyond the ½ mile perimeter from Tysons four Metrorail stations, and likely to discourage use of Metrorail.  Already the Tysons committee is wrestling with the massive infrastructure investment—especially transportation—that such an arrangement will create.  The Reston Task Force TOD area committees have come out with similar recommendations that would allow a more than doubling of the current density (gross square footage of development) in Reston’s TOD areas in less than 20 years and a 60:40 or 3:2 office:residential space ratio in Reston’s TOD areas, not much different than Tysons. 

Other issues aside (environmental impacts, traffic congestion, infrastructure costs, etc.), this planned mix of uses appears unrealistic if the business and residential trends outlined above are accurate.  The good news is that these plans do not mandate what will be built—the market will do that within the density constraints.  Still, once the new Comprehensive Plan becomes a County Zoning Ordinance as is the custom, the developers have a “by right” authority to build whatever is agreed to in the Plan, and that cannot be reduced in this “Dillon Rule” state.  Even now, JBG is arguing in Tysons that it intends to build an office complex under the old plan for Tysons rather than a mixed-use development as called for in the new one.  In general, by constraining residential development, key areas of the Dulles Corridor—including Reston--may miss important residential development market opportunities and could see investment in unoccupied and unprofitable office buildings. 

A secondary consequence of the current planning schemes for Tysons and Reston TOD areas is the impact on the nature of the supporting retail in each area.  As Reston Patch reports, Accenture’s departure from Reston Town Center will be on the area’s hotels and restaurants.   Indeed, hotels have their own county planning/zoning category and, thinking ahead a couple of decades, allocating density for too many hotel rooms to support a business environment that  will likely not exist reduces the efficacy of the plan and possibly means residents will not have access to retail services, etc., that they need.  While Reston Chamber of Commerce CEO “Mark Ingrao says Accenture’s departure from Reston in 2012 will have a minimal impact on the business community,” a continuing reduction in Reston Town Center office staffing or even departures to more desirable locations will definitely affect the nature and health of Reston’s business community.   

The core lesson from the Accenture headquarters departure experience appears to be that we need to re-think the mix of uses (and maybe the high densities) currently planned or being considered for the Dulles Corridor.  If Accenture is a harbinger of things to come,

• We will need to see greater growth in residential space and less growth office space than currently envisioned at both Tysons and Reston and maybe points farther west. 
• Moreover, we will have to re-think the needs of the many new residents in these areas, including the nature of the local retail shopping experience (relatively fewer business-oriented restaurants, more pharmacies and supermarkets, for example), their access to cultural and recreational facilities, and (especially in Reston) the availability of public open space—largely parks and natural areas—to sustain and enhance the quality of life experience in this premier planned community. 

In short, we must learn from the experiences of others and adapt our planning to the future as it is more likely to be rather than the one we are familiar with and, in some corners, hold dear.  Only in this way will Fairfax County be able to make the Dulles Corridor the economic powerhouse its leaders envision and its developers, employees, and residents will find worth investing in.