Metro’s Influence on Washington’s Commercial Real Estate

nrc-white-flint-metroNuclear Regulatory Commission headquarters office buildings at the White Flint Metro station in North Bethesda, MD
Photo credit: U.S. Nuclear Regulatory Commission

The Washington metro area has long been transit-dependent.  It is no surprise that there is a direct correlation between office rents and Metro-served locations.  Since the Metro system opened, Washington’s real estate activity has revolved heavily around Metrorail transit. Even with Metro’s recent problems, primarily the lack of upkeep, there continues to be a sizeable number of Metro users.

Looking ahead, once the intensive SafeTrack repair program is completed, Metro ridership growth should resume.  Over the past ten years or so, the Washington Metropolitan Area Transit Authority (WMATA), which owns and operates the Metro system, has been monitoring Metro’s impact on our economy, particularly the newest Metro Line, the Silver Line.

silver-line-tysonsMetro Silver Line tracks with Tysons, VA skyline in the background.
Photo credit: Ryan Stavely

While Phase I of the Silver Line has been completed, Phase II offers even more opportunities for strong real estate-related returns on investment.   According to WMATA and Transwestern data, it is very clear that Metro has a powerful influence on commercial real estate in Washington, D.C.  Over the next 25 years, about 42,700 office jobs are projected to be added within a half mile of four of the newest Silver Line Metro stations in the Tysons submarket–Spring Hill, Greensboro, Tysons Corner, and McLean.  Another 27,300 office jobs are also projected to be added to the Tysons submarket just outside of the half-mile station radii.  It is expected that 75% of this growth will happen over the next 15 years, with the Tysons Corner station receiving the most office demand during this expansion period.

When looking purely at square footage, it is expected that 8.5 million SF of office space will be built around these Silver Line Metro stations, which is a little more than half of the 14 million SF of office demand projected for the Tysons submarket.  It is no surprise that the average office asking rent of Metro-served locations is significantly higher than non-Metro-served locations, as you can see below.

It seems obvious that increased Metro accessibility leads to increased demand for commercial space; however, there is also a positive correlation with residential real estate.  As more jobs are added with the increase in office space in Metro-served locations, there is also an inherent increase in demand for housing near those areas due to commuting and accessibility factors.  With both residential and commercial areas working in harmony, new Metro stations draw users closer while also creating local vibrant neighborhood centers for citizens living in the Washington suburbs.

metro-tysons-corner-stationSilver Line Metro train arriving at Tysons Corner station
Photo credit: Ryan Stavely

Buying close to a new-built Metro station or one that is under construction or even in the planning stages has great potential for a stable and profitable return on investment.  With time, the areas surrounding new Metro stations are poised to grow exponentially in all facets of commercial real estate.  Retail, office, condominium, apartment, and even single-family development will eventually grow to a point where the submarket has a self-sustaining balance of commercial activity.  Transit-oriented development, or TOD, is the future for thriving activity centers.

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