Reston Virginia Investment Thesis (Buy-and-Hold)

Reston Virginia, the first master-planned community in the United States founded in 1964, is a Garden City about 20 miles outside of Downtown Washington D.C., which was recently added to the Washington D.C. Metro in 2022 with the expansion of the Silver Line. Reston has seen an incredibly fast rise to be one of the major entertainment, business, and residential areas in the country in the short sixty years since its inception. Reston is a truly masterfully planned community, with 55 miles of paved pathways, tennis courts and pools in every neighborhood, and several beautiful lakes that make the area very attractive to live in for residents. But what really makes Reston Virginia such an interesting investment is the meteoric rise of the Reston Town Center, and its recent office market outperformance.

*Lake Anna, Reston Virginia*

Originating in 1990, The Reston Town Center is a major employment and entertainment hub in the area, with companies such as Google, Leidos, Facebook, Microsoft, General Dynamics, and Fannie Mae, to name a few, more than 50 retailers, including an 11 screen LOOK Dine-In Cinema, CitySwing (Golf Simulator), a seasonal ice rink, many well-renowned restaurants and bars, and other highly attractive amenities such as a full service 243 bed hospital, a new metro, and the Dulles International Airport that is receiving $700 million renovations by 2026

*Reston Town Center*

Source: Rediscovering Reston-- the First Planned Community in the US

Source: Washington Dulles International Airport to Expand Passenger and Cargo Operations

One of the biggest points of discussion over the last few years has been around the office market, and how the rising office vacancies due to the shift towards a work-from-home and hybrid work schedule have pushed many companies to downsize or relocate out of previously major employment centers. This is apparent in Washington D.C.’s new high in office vacancy in Q2 of 2024 at 22.4% according to CBRE (Source). Although Reston as a whole has experienced this as well, with a 23.8% vacancy (Source) for the entire submarket, the Reston Town Center in particular has just a 4% office vacancy, with Boston Properties Group, planning to deliver another 1.1 million square feet with Reston Next.

Boston Properties Group (BXP), is currently the largest publicly traded developer, owner, and manager of Class A Office property in the United States. Boston Properties Group has been in Reston since 1980 and has always coveted the area's office market for its proximity to Washington D.C.. However, the rapid rise of the technology sector in the Reston area has sparked them to double down on their bets for continued strength of the office market in Reston Town Center (the D.C. metro area has the 3rd highest density of tech talent in the United States and 9th in the world, especially markets in the Dulles Toll Road Corridor like Reston, where 70% of the worlds internet traffic flows through and is home to companies like Google, Oracle, and Microsoft). With the changing office market and tech boom spurred by AI, Cushman and Wakefield sees the quality of the office space market becoming increasingly more important: “With increased flexibility, the quality and location of office space becomes more important. It is critical to identify markets with dynamic ecosystems of tech companies and employees, as well as ample availability of high-quality office space.” (Source)

*Google Office Building in Reston*

Source: Global Tech Cities: Washington, D.C.

Source: The Changing Face of the Dulles Corridor

Source: Tech Cities: The Global Intersection of Talent and Real Estate

BXP had plans approved in 2018 to build Reston Next, a 4.4 million square feet mixed-use development, and one of the first big developments to go up around the new Reston Town Center Metro. Boston Properties is currently looking to reduce the residential and retail footprint of Reston Next, and increase the office development, after the success of the first two office towers that became available in 2021, now being occupied by Fannie Mae and Volkswagen. Boston Properties submitted plans on June 29th, 2024 to add an additional 287,000 square feet of office to their second phase of the development, clearly demonstrating how confident they are in the strength of the Reston Town Center office market. They will also build a bridge across Sunset Hills Road, improving the walkability of the Town Center to the metro, and invest “several million dollars” into improving the main Fountain Square in the Town Center.

*Reston Next Development*

Source: NEW: Developer plans next phase of Reston Town Center expansion

Source: Boston Properties makes rare pitch for next phase of Reston Town Center

Source: Reston Town Center is close to 100% leased. What's its secret?

Source: Boston Properties Rises to the Occasion

Source: Major makeover planned for Reston Town Center's common areas — their first in 30-plus years

Source: How Fannie Mae helped Boston Properties land Volkswagen's U.S. headquarters

Boston Properties is not the only firm looking to massively develop the area, with the approval of Rivana at Innovation Station, which was approved last year for a 103 acre, 9 million square foot Urban Center, with first occupancy slated for 2027 right by the new Innovation Center Metro, just 4 miles from Reston Town Center.

*Rivana Development*

Another developer, Chuck Kuhn, just bought the Waterside development site a few weeks back right by the Innovation Center Metro as well, which is entitled for 3 million square feet of development, 2.2 million being non-residential. Chuck Kuhn plans to submit concept plans in the next month or two to give a better idea of what the space will turn into, but it has been long known the plans there would be to change the Chantilly Stone Query into a lake, continuing the beautification of the area.

*Rendering of Waterside Development*

Brookfield is ahead of some other developers in the area, already well into it’s Halley Rise development, which delivered it’s first phase of buildings in 2022, and at completion in 2026 will have brought 1.5 million square feet of office space, 250,000 square feet of retail, 5 acres of public open space, and new public streets and infrastructure, also just outside the Reston Town Center Metro.

Source: Chuck Kuhn Set To Buy Long-Stalled 225-Acre Loudoun Development Site

Source: Exclusive: Chuck Kuhn has deal to buy massive Silver Line development site

Source: Sterling quarry would become lake in waterside development

Source: Rivana Developers Eye Construction in Early 2024

Source: Halley Rise Project Remains on Schedule in Resto

Thanks for reading my thesis on Reston Virginia. I'd love to hear your thoughts on your favorite markets right now for buy-and-hold opportunities. Shoot me a message if you are interested in learning more about Washington D.C. real estate submarkets that are poised for future growth, and or if you are looking for any help buying an investment property in the Washington D.C. area!