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The Health of Arlington’s Commercial Corridors

Two weeks ago, on January 20, we growled about the 2013 real estate property assessments, which had just been released, asking whether the numbers portend a real estate tax increase. We noted the county determined that single-family residential values were up 1.0%, but commercial property values were flat in comparison to 2012.

Yesterday, Scott McCaffrey reported in an online Arlington Sun Gazette story that leaders of two so-called business improvement districts are taking a “long-term view of office-vacancy rates” in Arlington’s commercial corridors. According to McCaffrey:

“Arlington’s ballooning office-vacancy rate presents challenges, leaders of two of the county’s business-improvement districts say, but they are not insurmountable.

“It’s a very challenging time across Arlington and across the region,” acknowledged Angie Fox, president and CEO of the  Crystal City Business Improvement District, or BID. “It’s not going to turn around tomorrow.”

“It has been Crystal City that has seen the biggest increase in vacancy rates among Arlington’s commercial corridors. The rate rose from 13 percent in the fourth quarter of 2011 to 22.9 percent in the fourth quarter of 2012, according to Arlington Economic Development figures, taking it from among the lowest to the highest in the county.”

McCaffrey notes the federal government’s BRAC relocation initiative “has led to the departure of big tenants from Crystal City in recent years.” He also notes the following changes in vacancy rates in several of Arlington’s commercial corridors:

  • Overall County -- increased from 11.5% in 2011’s fourth quarter to 16.3% in 2012’s fourth quarter.
  • Crystal City -- grew from 13.0% in 2011 to 22.9% in 2012.
  • Rosslyn -- 13.4% in 2011 to 16.8% in 2012.

By comparison, vacancy rates in Northern Virginia as a whole increased from 14,6% to 15.7% for the comparable period, according to the January 2013 “economic indicators" published by the county’s economic development department. The vacancy rate in the Clarendon/Courthouse corridor did improve slightly, decreasing from 12.0% to 11.2%.

The department’s report lists a broad range of indicators such as office square foot absorption data, hotel occupancy rates, and air traffic operations.

Since the county government budget "grows" 6 - 7% a year, you can see that with little or no growth in real estate values, the County Board can only achieve that 6% growth in revenues by increasing the real estate tax rates. And since commercial property can only increase in value if there is demand for the property, there will be increasing pressure on residential property to carry the largest burden of real estate property taxes.

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