Office workers need less space than they once did. Over the years businesses’ space needs per office employee have shrunk from approximately 250 square feet to less than 190 square feet, says Ben Keddie, vice president of Coldwell Banker Commercial Elite, as quoted in the Fredericksburg Free Lance-Star. Office space is expensive, and businesses have learned how to function with less of it. With the rise of the mobile workforce, open work spaces and office hoteling, it is easier than ever to conserve space and rein in lease and rental costs.
That trend has dramatic, if unappreciated, consequences for local governments’ real estate tax base and the management of growth and development. If businesses need less office space per employee, they need less office space overall. Which means the cost of office space drops. Which means developers build fewer new office buildings. Which means local governments are finding it harder and harder to grow their tax base.
Loudoun County in Northern Virginia, it appears, is facing that very problem. “A softening commercial office market has made it difficult for developers to make money on their commercial land, because there are fewer companies interested in large parcels,” reports the Loudoun Times. Indeed, it might be said that outlying counties in the Washington metropolitan region are facing a trifecta of troubles regarding commercial real estate: (1) business enterprises are shrinking their office footprints everywhere; (2) sequestration-related budget cuts have dampened demand even more in the Washington region; and (3) when Washington-area businesses do seek new digs, they show strong preferences for walkable urbanism, a higher-density, mixed use pattern of development that accommodates walking, biking and mass transit. Walkable urbanism is found mainly in the region’s urban core and along Metro lines, not in low-density burbs like Loudoun.
Not surprisingly, Loudoun’s supervisors appear to be adrift in dealing with these trends. . . .And so too does the Fairfax County's Board of Supervisors. Even with the Silver Line extending through Tysons and Reston to Dulles Airport and beyond in the future, commercial office space vacancies remain near all-time highs in both Tysons and Reston.
Already the Board has had to shift a growing share of the burden of property taxes to residential owners because the commercial office market is simply not growing. And, as the office market continues to stagnate, residential property values will also stagnate (if not decline) in the face of a lack of employment growth and property tax rates as well as actual property tax bills will need to go up to feed the County spending beast. This image from Bacon's post pretty much says it all:
|If housing stock like this Loudoun County beauty can’t cover its costs in infrastructure and services, the local governance model is badly broken.|
We have pointed out multiple times to the Board why its expectations of massive commercial development at Tysons and Reston were unlikely to occur, highlighting the downsizing of office space per worker. (The County's response: Houston has 300 square feet of office space per worker. Houston?!?! Oh yeah, that's where Exxon moved its corporate headquarters to from Fairfax County. If you want to see what we wrote, search "office space per worker" on this blog.) And now Fairfax County is facing a decline in employment, especially in its high-value professional and business workforce focused largely on serving federal government needs, as Congress continues to prove it is incapable of governing the country--sequestrations, budget cuts, shutdowns, you name it. And, of course, the County is not now and will be among the last to develop "walkable urbanism" like Arlington County in the face of reduced demand for the office space serving urban-style development. Washington, DC, Arlington, and other close-in jurisdictions will be the beneficiaries of office space shrinkage, not Fairfax County--much less Loudoun.
Fairfax County's economic growth policy is based on the hopium of endless regional growth, and is bound to fail, possibly sooner than later.
And please read all of Bacon's post here.