Office, Data-Center Portfolio Sold for $138.5M in D.C. Area

Tysons East Metro Portfolio, a five-building complex encompassing approximately 310,800 square feet of office-and-data-center space in McLean, Va., has found a new home for the price of $138.5 million.

August 18, 2011
By Barbra Murray, Contributing Editor

Tysons East Metro Portfolio, a five-building complex encompassing approximately 310,800 square feet of office-and-data-center space in McLean, Va., has found a new owner, courtesy of a transaction orchestrated by commercial real estate services firm Transwestern on behalf of the seller, TDC L.L.C. The AFL-CIO Building Investment Trust snapped up the suburban Washington, D.C., portfolio for $138.5 million.

Located along Old Meadow Rd. in the Tysons Corner area of Fairfax County, the portfolio consists of two office structures totaling roughly 160,000 square feet and three data center buildings featuring approximately 150,000 square feet. Only a miniscule amount of square footage is available for occupancy at Tysons East. The property is 98 percent leased with a tenant roster that includes six leading corporate occupants. Level 3 Communications, MITRE Corp., PAETEC Communications, Sanford-Brown College, PRS Inc. and Sprint Communications all call the complex home.

Tysons East also comes with options, as the site, which spans 16.8 acres, can accommodate the development of more than 2 million square feet of mixed-use space.

“It was a tremendous buy for AFL-CIO and their advisor, PNC Realty Investors, in that it will ultimately create numerous jobs through the redevelopment of the site,” Gerry Trainor, executive managing director with Transwestern’s Institutional Commercial Group, told Commercial Property Executive. “AFL-CIO bought it because the union likes to buy real estate that creates jobs. It’s a great income-producing property that has a lot of upside.”

With a nearly full tenant roster and no significant lease turnover until 2014, the income will continue to roll in steadily for the next few years and, more than likely, for many years to come, given the stature of the metropolitan Washington, D.C., market. Presently, the area boasts the third lowest office vacancy rate in the nation, according to a midyear report by Delta Associates, Transwestern’s research affiliate. “We expect the Washington metro area market to remain one of the best performing office markets in the nation in the long run,” Delta concludes.

And there’s no visible end in sight to the strong demand for data center accommodations. As Delta notes, Northern Virginia is second only to New York on the list of the largest data center hubs on the East Coast, and the area is a high-tech epicenter that will continue to attract companies that utilize the internet and thus, the data center infrastructure required for internet use. Additionally, the favorable conditions in both the office and data-center markets will produce more jobs, which will produce higher demand for multifamily accommodations. Alas, there is a promising future for mixed-use offerings in the area in the near and long term.

However, given the lengthy zoning process that would have to transpire before any shovels can hit the ground, it is unlikely that any new commercial or residential buildings will sprout up at Tysons East in the near future.

Regardless, Trainor said of the transaction, “It’s a win-win for the buyer and the seller. The timing of the transaction met the timeline the seller needed, and it will ultimately serve the buyer’s mission for job creation and to capitalize on the value that can be created through additional density.”