How is the real estate market going forward for Falls Church and environs? A panel on just that subject was held at Falls Church’s Fairview Marriott last week for members of the NAIOP commercial real estate developers association, and the results were so mixed that one of the two major presenters, Willie Walker, limited his graphics to cute pictures of apes and other primates. The other presenter, Elizabeth Norton, did better.
Attending from the City of Falls Church to make better sense of it all for us was former City Councilman and Economic Development Authority member Ross Litkenhous, who offered the extensive remarks exclusively to the News-Press in the panel’s aftermath (see below).
Commenting on Litkenhous’ important contribution was Falls Church’s Economic Development Authority chair Bob Young, who concluded that Litkenhous’ remarks are “a very accurate assessment of the current real estate environment.”
Young said that Litkenhouse is “correct that the situation in Falls Church is very different (much better) than our neighbors.”
“I believe his continued suggestion that we work on creating an innovation hub is a good one. I also would add that it’s time for a concentrated effort to envision future development of the city’s property yard (which is in the Gorden Road Triangle). This is, I believe, a fertile area for new affordable housing as well as new facilities for the Department of Public Works and other uses such as self-storage.”
Here’s what Litkenhous had to say following last week’s NAIOP panel:
“This down cycle in the real estate market is still accelerating but the mechanics behind this particular decline are different. Banks are better capitalized which means they can absorb losses better than they did in the Great Recession. There isn’t the same systemic concern that we had when residential values collapsed back in 2008/2009.
“Despite struggles with commercial real estate, the residential market seems poised to remain strong, even with higher borrowing costs. There is still an under-supply of housing nationally and locally, and as we discuss almost daily in Falls Church, the real need here is workforce and affordable housing which can partly be solved through a more diversified housing stock. Falls Church is facing what many localities are experiencing throughout the country where the current trajectory of housing prices in combination with an under-supply of workforce housing is hampering efforts to create diverse and healthy economic urban centers.
“The office sector, to no one’s surprise, is going to continue to be decimated by increasing vacancy rates and owners’ inability to refinance to lower borrowing costs. In the next 18 months we’ll see a lot of office buildings in dense urban areas and under-amenitized secondary markets sold off at a fraction of their current value.
“Office is facing a perfect storm and lots of office building owners with B and C class assets in secondary and tertiary markets will lose. This is also going to have a downstream effect on localities’ property tax revenues. A hidden landmine that most taxing jurisdictions don’t seem to have fully grasped or been willing to discuss.
“Falls Church however will remain insulated from this trend given the vibrant and walkable nature of our city and the fact that we are not overly reliant on large office buildings like Arlington and Tysons. In fact, I believe additional office product or conversions to office in either a co-working or shared office model would do very well in Falls Church.
“We have an abundance of small businesses in Falls Church that could fill those types of unique office buildings. One area of opportunity I see is a renewed focus on creating a welcoming environment for startups and entrepreneurs.
“Falls Church has all of the unique ingredients needed to attract and retain new startups who thrive in vibrant, walkable, highly educated sub-markets. One area of Falls Church that I continue to feel strongly about in terms of creating an innovation hub for these types of new businesses is the Gordon Road Triangle section of Falls Church. Currently home to underutilized industrial-type properties, it has all of the right ingredients to usher in a well planned, medium density commercial development in partnership with the city that will cater to these new business trends.
“Nationally, retail properties that are heavily dependent on day time foot traffic from office workers are also in trouble, but again, Falls Church remains insulated there as well. It has become abundantly clear that walkability to and between commercial properties in more dense urban areas are poised for the greatest success in the long run. Falls Church is perfectly situated to succeed in this new environment. I’m confident that our city leaders will continue to examine economic and commercial development through a big- picture lens weighing carefully the various types of real estate we need and how each fits into the broader need of the region and our Falls Church community. So far their balanced and analytical approach has paid off.
“I also continue to believe that Falls Church is a wonderful reflection of thoughtful and smart urban planning and we’re not done yet. The balanced approach between unique and experiential commercial real estate and pockets of higher density in key areas of town, have created an environment that perfectly balances the need for a unique city-like scale that isn’t overwhelming while also generating powerful and sustainable fiscal benefits for the city at large.”
