Reston 20/20 Statement to RP&Z on County Reston PRC Proposal, May 15, 2017

Statement to the Reston Planning and Zoning Committee

By Terry Maynard, Co-Chair, Reston 20/20 Committee

Re the Proposed Reston PRC Zoning Ordinance Amendment

May 15, 2017

Good evening.  I am Terry Maynard, 2217 Wakerobin Lane, speaking on behalf of the Reston 20/20 Committee.  

First, thank you for taking your time to listen to the many voices of Reston on the County’s proposed PRC zoning ordinance amendment. 

Most importantly, the PRC zoning amendment proposal removes all concrete zoning constraints on high-density residential construction in Town Center, a situation that can lead to serious unforeseeable circumstances.   We must rely on Board discretion.  Just look at the Board approval given to a FAR 4, 26-story office building to replace the Town Center Office Building that is dramatically inconsistent with the Reston plan and its own TOD policy. 

As we read it, the PRC amendment would allow the addition of more than 28,000 residents to our community, virtually all in high-density housing in the half of Reston Town Center north of the toll road.   In 2010, about 8,000 people lived in the Town Center PRC after nearly a quarter century of development.  In the last 7 years, residences for another 8,000 people have been built or approved in there.  Longer term, Board approval of the zoning ordinance would allow about 45,000 people to live in Town Center.  This would be in addition to the 45,000 people or so who could be added to the non-PRC portions of Reston’s station areas under the Reston plan and other zoning codes.  

I would like to speak to you briefly about how this development will affect infrastructure and commercial development issues in Reston. 

Transportation may present the most pressing infrastructure challenge as this unfolds in the PRC.  County data shows that, of the two-dozen Board-approved Reston station area transportation projects, only one sidewalk improvement at Wiehle Station has been completed.  Of the dozen projects in the RTC PRC area, none except the Town Center Parkway tunnel has begun and one has been put on hold.  The Soapstone Connector won’t be put out for contract until 2025.  None of this includes the still concept-level intersection improvements postulated by RNAG and the absence of any planned bus transit expansion for the PRC. 

Yet station area development, including development in the RTC PRC and its approval continues unabated.

All of the additional residential development also has implications for planned commercial development in the Town Center PRC.  Approval of the zoning ordinance amendment could unhinge the planned balance between residential and commercial development there and the desirable effect it has on reducing driving.    

Worse yet, developers—never ones to miss an opportunity—could use the high, if not unconstrained, residential construction limits to leverage even higher or unlimited commercial development in the PRC.  This alone suggests the urgency of a concrete upper limit on station area PRC density, not just Board discretion. 

One particular concern in this process is the availability of essential retail facilities, not to mention amenities such as theaters, restaurants, etc., for a population approaching 90,000 in Reston’s station areas, including the 45,000 in the Town Center PRC.  Two supermarkets and one pharmacy are not adequate, and to the extent that there is a shortage of these and other essential and desirable shopping in the PRC will mean more residents driving.

All this suggests that the County and the community need to understand the implications for Reston of the zoning ordinance amendment and quite possibly amend it so that it is consistent with Reston’s vision and planning principles.  This will take time, not the head-long rush the County and Board seem to be in to get this amendment passed with three public meetings in three weeks this month. 

What’s the rush?

Based on future analysis of the implications of the allowable development for infrastructure and other community needs, some amendments to the proposal that might be considered are:

• Raising the overall residential density per acre incrementally to, say, 14 people per acre and seeing how infrastructure, commercial development, and the Reston community adjusts to that density before moving another step higher.
• Creating a fourth residential density category called “urban” for the station area that has a concrete cap on it of, say, 60-70 DUs per acre.
• Not raising the zoning cap at all until at least the current approved transportation and other infrastructure projects, such as schools, open space and parks, etc., are completed.

While these are just ideas, they and other ideas need to be considered in a thorough, systematic, and unbiased way based on a consideration of the facts in a manner that meets the needs of the community as well as the County. 

Washington’s sputtering office market has developers scrambling, WaPo, May 19, 2016

This Washington Post article by Jonathan O'Connell highlights the erosion of the suburban office market as many CRE firms look elsewhere to grow.  The "money line" in the article appears about half way through it:

“People are just not taking as much office space anymore,” (Savills Studley's Thomas) Fulcher said. “Even if companies are growing, they are not taking as much space.”

So rather than continue to try to lease the buildings, some of Washington’s most tenured firms are selling them off or moving on to greener pastures. . . .

So what is the situation now:

Record-high vacancies have become the new normal as employers curb their appetite for space and shift their attention to more urban locales. Some office buildings have been empty so long that several of the region’s stalwart development firms are tearing up their plans and selling off large chunks of property at bargain-basement prices in favor of pricier, more centrally located buildings.

Buildings began to empty during the recession, and they took another punch when the government shut down and federal spending slowed. The local economy began to pick up last year, but the recovery has been spotty, with construction cranes dotting the Washington skyline but absent from many parts of the suburbs, particularly areas far from mass transit. . .

The pain for Washington building owners is most acute in the suburbs, where vacancy rates have been on the rise for five years in a row and are about double that of the District. By one count, there are 151 spaces of 50,000 square feet or more available in Northern Virginia alone.

But downtown has not been spared; . . .

We have explained this evolving situation to Fairfax County Board Chairman Sharon Bulova, the rest of the Board of Supervisors, and the Planning Commission in numerous letters, but they all still are planning hundreds of millions of additional square feet of office space across the county, including some areas--such as the Richmond Highway Community Revitalization District--that do not even have access to Metro.  We received one rather pathetic response from the County Planning Staff that defended the County's far outdated standard of 300 gross square feet of office space per worker (reality is less than 200 SF/worker and as low as 100 SF/worker) and the outrageous County-sponsored taxpayer-paid office employment forecasts of GMU's Center for Regional Analysis that drove Tysons' and Reston's master planning efforts.  The same also occurred in Reston's Lake Anne redevelopment plan that has sense folded like a cheap suit.  It has happened in virtually every CRD, CBC, CRA, and TSA in the County as County leaders attempt to build and tax their way out of their poor budget management record.

Now the huge and intentional planning development errors are about to be augmented by an equally faulty one-size-fits-all zoning ordinance amendment (ZOA) that will irrevocably permit FAR 5 development in more than 20 County localities, including Reston's TSAs and Richmond Highway CRD.  That ZOA, left unamended, could permit tens of millions of additional square feet of office space in EACH locality--and that doesn't count Tysons which is in a category all its own. 

It is astounding to us at Reston 20/20 that County officials continue pursuing a policy course that will lead to more vacant office buildings, more congestion and pollution, and greater taxes on the County's residents in the face of overwhelming evidence that the office market has stagnated for the foreseeable future and the repeated judgments of experts in the CRE industry and amateurs like ourselves that this is the case. 

The County Emperor really is wearing no clothes, but none of its sycophants is willing to drive that point home.  In fact, developers keep demanding more density.  The farther we go, the worse the situation will become.

SELLING IT: FCEDA goes off the deep end selling the County's office space growth.

An article in InsideNOVA.com by Brian Trompeter, who regularly reports on Fairfax County business matters, details a presentation by FCEDA's Director of Real Estate Services Curt Hoffman to the Tysons Regional Chamber of Commerce entitled, "Commercial real estate continues headlong growth in Fairfax."  The article begins:

New office and mixed-use projects are being built like gangbusters in Fairfax County and the county’s economy remains formidable, a local real estate expert said May 11.

More than 2.6 million square feet of office space now is under construction, 83 percent of which has been leased in advance.

“It’s kind of like going to the car dealer and buying your car off the assembly line,” said Curt Hoffman, director of real estate services for the county’s Economic Development Authority, who briefed Tysons Regional Chamber of Commerce members during a breakfast meeting at the agency’s Tysons office. . . .

Companies are flocking to Fairfax County . . . Hoffman said. . . .

Wow!  How could life get any better for a developer and the County's economy and property tax revenue flows?

Just a tad of perspective shows how bogus the growth in the County's office space is.  FCEDA's data shows that, since 2006, the County has added more than 11.5 million square feet of office space.  At the same time, the amount of vacant office space has increased by an almost identical amount:  11.1 millions SF.  In fact, the amount of occupied office space in Fairfax County has increased by a measly 319.5 thousand SF--enough space to house 1,065 new office workers--112 new office workers per year--using the County's office space per worker planning assumption (300 GSF/worker).

The fact of the matter is that businesses are merely moving their employees from older buildings to new ones as FCEDA's mid-2015 data shows.  (Although it is now mid-May 2016 , FCEDA has not yet published its year-end 2015 data update.  CRE brokers routinely publish this office data quarterly with a one-month delay.)  Over the same period, the office space "available for relet" has grown by 10.9 million SF.  Available new office space has grown by less than 200,000 SF.

Against that backdrop, Hoffman called the County's 16.2% office vacancy rate (and that is "direct"only; "indirect" vacancies--unoccupied but leased space--adds two percentage points to that rate) is "near" the "healthy" range of 10%-15% range.  We call bullshit!  From a developer's perspective, that rate should be under 10%; the lessee wouldn't want to see it below 7% as rents would skyrocket.  In fact, over the 35 years the County has tracked its office market, the average direct vacancy rate has been 9.8%.  There is nothing healthy about an office market where the vacancy rate exceeds 10%--and the County's overall vacancy rate now exceeds 18%.

And office vacancy is becoming a larger problem for the County.  The office vacancy rate has more than doubled since 2006 from 7.7% to 16.5%.  Worse, it has grown every year since 2010 (then at 13.3%) when the national economic recovery began.  If the office market can't strengthen during a period of national economic growth, its future as a driver of growth in the local economy is very much in doubt, even with the arrival of the Silver Line in the Dulles Corridor.

One point Hoffman makes is that 73% of the current office space is becoming obsolete, meaning only that it is more than 20 years old--and “that’s the next market (replacing office space) we see taking off,” Hoffman said.  We disagree for several reasons.

• Office job growth in the County has been and will continue to be slow, if not stagnant, thanks largely to Congress' inability or unwillingness to spend on larger government and government contracting.
• Office space size per worker will continue to shrink.  Although the County continues to insist on using 300 GSF/office worker as its office space planning metric, the fact of the matter is that office space per worker is shrinking dramatically.  Some estimates say as low as 100 SF/worker.  We believe 200 GSF/worker is a comfortable estimate of current and future space per worker for at least a decade.  
• Office-type jobs, especially business and technology work, are shifting to other markets for a variety of reasons, including the fact that the internet means that much of this business can be conducted from anywhere in the world.  

As a result, we anticipate that a significant share of the obsolete office building market, possibly a third or more, will be re-built (possibly years from now) as high-density residential as that market continues to show a relatively strong demand.

We appreciate that Hoffman's job is to sell the County's real estate, but he--and many others in County leadership positions--need to provide more credible presentations on the state and the direction of the County's economy, including its office market.  The continuing failure to provide credible information will itself lead corporations to move their businesses to other locations whose leadership is more candid about their business conditions and prospects.  

Here's the FCEDA data:

Countywide Office Space Trends: 1980–2015 (Square Feet) Year Standing Inventory 1 Vacancy Rate (%) Total Leased 2 New Leased Relet Leased Total Direct Available New Available Relet Available 1980 20,567,000 1.7 1,400,000 NA NA 343,086 279,539 63,547 1981 27,900,000 2.9 2,623,579 1,486,919 146,046 810,950 439,406 371,544 1982 30,750,000 4.5 2,639,313 1,193,946 451,186 1,374,534 866,906 507,628 1983 32,100,000 2.9 2,312,379 1,414,951 360,211 933,012 366,792 566,220 1984 35,100,000 7.3 3,318,178 1,706,050 562,293 2,558,566 2,018,716 539,850 1985 42,800,000 9.4 5,107,357 3,719,570 440,487 4,036,662 3,283,319 753,343 1986 48,700,000 9.4 5,889,741 3,908,799 339,682 4,555,065 3,119,637 1,435,428 1987 53,616,000 8.8 5,475,880 3,651,588 942,557 4,701,055 3,087,638 1,613,417 1988 58,073,000 10.8 5,014,401 3,046,598 1,004,913 6,263,547 3,818,738 2,444,809 1989 63,575,000 15.2 5,973,710 3,224,384 1,353,114 9,645,834 4,227,527 5,418,307 1990 67,139,000 18.3 5,006,377 2,202,932 2,424,145 12,255,516 5,118,433 7,137,083 1991 72,702,000 16.8 5,535,950 2,374,087 3,141,863 12,185,419 3,829,149 8,356,270 1992 73,056,000 14.8 4,854,778 1,433,064 3,421,714 10,788,508 2,652,612 8,135,896 1993 74,397,000 12.4 5,272,604 1,393,415 3,879,189 9,201,590 1,409,847 7,791,743 1994 75,562,432 9.9 6,306,117 1,290,152 5,015,965 7,490,605 651,098 6,839,507 1995 76,074,620 8.5 5,261,893 498,137 4,763,756 6,458,580 308,062 6,150,518 1996 78,265,573 6.2 7,040,085 1,316,827 5,723,258 4,908,932 77,775 4,831,157 1997 79,617,676 4.3 6,196,885 1,959,447 4,237,438 3,390,293 19,177 3,371,116 1998 82,088,287 4.1 6,991,158 3,810,783 3,180,375 3,392,909 531,855 2,861,054 1999 88,375,053 4.8 9,264,808 5,910,855 3,353,953 4,238,492 1,340,336 2,898,156 2000 93,563,753 3.5 12,750,968 6,918,762 5,832,206 3,236,371 1,007,213 2,229,158 2001 97,602,908 6.4 5,174,234 2,606,024 2,568,210 6,281,688 2,312,291 3,969,397 2002 100,912,347 12.1 7,648,790 1,022,910 2,631,385 12,176,938 3,291,394 8,885,544 2003 101,507,385 11.2 10,570,315 1,788,402 4,898,701 11,393,801 1,870,915 9,522,886 2004 102,117,697 8.6 10,969,819 1,762,757 6,028,830 8,764,801 919,191 7,845,610 2005 103,520,646 7.8 9,659,060 537,974 5,920,239 8,054,510 1,053,457 7,001,053 2006 105,054,801 7.7 10,805,683 2,249,866 7,569,360 8,115,057 1,155,235 6,959,822 2007 107,232,650 9.2 9,382,013 1,378,208 6,832,122 9,857,339 2,164,415 7,692,924 2008 111,189,301 12.1 9,976,277 1,808,055 7,146,620 13,422,946 3,419,220 10,003,726 2009 112,556,702 14 10,330,158 1,162,887 8,425,631 15,723,157 3,076,675 12,646,482 2010 113,191,835 13.3 13,586,158 1,317,120 11,590,346 15,091,196 1,926,139 13,165,057 2011 113,624,952 13.7 11,656,935 1,300,674 9,694,529 15,600,787 1,267,677 14,333,110 2012 114,056,515 14.4 10,717,111 1,251,127 8,833,486 16,454,250 1,039,607 15,414,643 2013 114,771,222 14.4 12,280,230 823,756 10,307,898 16,577,368 1,404,234 15,173,134 2014 116,238,615 16.3 9,833,053 521,971 8,711,025 18,897,111 1,498,179 17,398,932 2015 3 116,509,060 16.5 5,031,099 195,295 4,459,714 19,205,621 1,317,831 17,887,790 1.  Includes inventory outside submarket areas 1980-2000 only. 2.  ln some years, total leasing reflects the preleasing of buildings under construction and about to be constructed, as well as new and relet space. 3.  Through June 30, 2015.
								Relet Available
								63,547
								371,544
								507,628
								566,220
								539,850
								753,343
								1,435,428
								1,613,417
								2,444,809
								5,418,307
								7,137,083
								8,356,270
								8,135,896
								7,791,743
								6,839,507
								6,150,518
								4,831,157
								3,371,116
								2,861,054
								2,898,156
								2,229,158
								3,969,397
								8,885,544
								9,522,886
								7,845,610
								7,001,053
								6,959,822
								7,692,924
								10,003,726
								12,646,482
								13,165,057
								14,333,110
								15,414,643
								15,173,134
								17,398,932
								17,887,790