Giving Advice to Developers

Giving Advice to Developers

County department wants developers to subdivide large tracts of land into smaller parcels.

The Department of Economic Development has come up with a tactic for developers to make more money on their land.

First, developers take notice: Loudoun needs additional small parcels of land with zoned infrastructure that can be developed fast.

"We are telling developers to take advantage of it, to buy pieces of land and develop them into smaller lots," said Robyn Bailey, the department's manager of business infrastructure. "There is a definite market niche."

Bailey is the author of a new market analysis of eastern Loudoun County's office and industrial land, commissioned by the department to generate more business and to help developers capitalize on the expansion part of the business cycle.

Department officials knew the county needed additional "lot sale" land, or small parcels with zoned infrastructure that can be developed rapidly, she said. The report's findings underscored that need; the county has 508 "lot sale" acres zoned for office and industrial uses. That compares to a total of 12,858 acres zoned for the same use. The county did not analyze retail land in the report.

She said 69 percent of the county's office and industrial land is still available for development. An estimated 3,244 acres is potentially available within the next three years. Loudoun has developed 4,008 acres.

"If a business or developer comes to us and says, 'I want five acres,' and if we don't have someone willing to sell the land, we'll lose that developer to another state or neighboring jurisdiction," Bailey said. "Loudoun is a great market, because there are unique opportunities to position your land and make money on your land right now by putting it in the 'lot sale' category."

Bob Buchanan, one of the partners of Buchanan Partners, Gaithersburg, Md., said his company has been successfully selling the smaller parcels. "There aren't many people who are competing with us," he said. Buchanan Partners has sold 45 of its 53 acres in the Dulles Trade Center I on Route 606, west of the Washington Dulles International Airport. The company is seeking development approval for Dulles Trade Center II, which has more than 50 acres.

Buchanan Partners has been developing property in the county for about 25 years, including the Loudoun Tech Center and the Dulles Town Mall.

THE ANALYSIS, the first of its kind prepared by the Department of Economic Development, makes two other conclusions. "One, Loudoun is extremely fortunate, because it has a tremendous opportunity for office and industrial development. The land is zoned," Bailey said. "Second, we need to respect that land and understand that we need to be sure we have a variety of land options."

The report identifies the county's three land options:

· Lot Sale - small parcels of land, subdivided with infrastructure.

· Land Sale - land sold in large tracts

· Developer/build - land that is typically not for sale and available for built-to-suit and lease options.

Bailey also identified the county's six corridors as diverse land options: Route 7, Route 28, Route 625, Route 606, The Greenway and Route 50.

Another key finding in the report was that developers have been using less space than the allowed density of 0.40 as permitted by the zoning ordinance. If they continue with this trend, the report said, 92.5 million square feet will be built on 8,850 vacant acres instead of 149.2 million square feet.

She said that "land sale" transactions are encouraged so developers can divide the large tracts into smaller sites. Lenders, however, are reluctant to provide big loans at the tail end of a recession. "It's hard for the investment community to say, 'Why buy 100 acres when we're competing with 8,850 acres?' " she said. "We're saying you're not really competing against 8,800 acres. You're really competing with 500 acres."

THE REPORT ENCOURAGES increasing the density while avoiding land use conflicts. Bailey said Loudoun does not currently have a business community that would support maximum density. Failure to achieve better density, however, could lead to a rapid decline in available space and consequently, a decrease in the tax base, the report said.

Maximum density is difficult to achieve unless developers build parking garages, which costs three times more than surface parking, the report said. The additional rental cost associated with building the garages could create financial difficulties for Loudoun's small businesses, which make up most of the county's business environment.

The America Online campus has maximum density, occupying about 40 percent of its floor-to-area ratio. AOL has a parking garage and four-to-five-story buildings.

Lansdowne, another office park, is about 0.20 density, with more surface parking and open land, and one-to-three-story buildings.

The report cautions developers to build according to the general plan and respect their neighbors. Bailey, a former gas station owner, cited an example. The county has planned where gas stations should be built in the county. The report advises developers to respect that decision and not put one where it doesn't belong.

"That affects not just your business but the people next door who don't want to be next to a gas station," she said. "We want to help developers build really great corridors, where the county, landowners and developers work together."

NOW, MORE than ever, there needs to be a collaborative effort to design what is best for Loudoun, Buchanan said. "The pendulum has been swinging widely for the past 20 years. It needs to be more of a community approach versus the wild swings in politics and priorities."

Loudoun County has changed from a bedroom community to an employment center in the last decade, the report said. The region was deep in a recession in 1991 and began emerging from it in the following two years. The greatest expansion with the technology boom occurred through 2001, when the recession struck again. During the good times, the county doubled its office and industrial footage by 14.3 million square feet.

The economy of 2004 is comparable to 1993, Bailey said. She predicted it would take another 12 to 18 months to pull out of the recession. "We're seeing a lot more activity of businesses looking for space," she said. "Hopefully, it'll come sooner. As more businesses look for space, more developers will be inclined to build that space."

Buchanan said developers wouldn't want to move ahead until some of the vacancies are absorbed. Office vacancy rates declined from 17.2 percent in 1992 to 2.6 percent in 1997. By 2003, they were up to 13.8 percent. Industrial vacancy rates declined from 26.7 percent in 1992 to 5.8 percent in 1997. In 2003, they were up to 19 percent.

"The Loudoun market is still evolving," Buchanan said, comparing it to Reston, which already has achieved a high corporate image. "There is a lot of potential in Loudoun, because of the number of houses that have sprung up in the last five years in very high quality residential neighborhoods. There are a lot of people who want to have their offices there."