With Control Of Crystal City And Potomac Yard, JBG Smith Sees Route 1 As The Next R-B Corridor

Traveling along Route 1 from Arlington to Alexandria, the difference is night and day.

On one side is Crystal City, where the streets are lined with tall, aging office buildings that keep the sidewalks filled with people during the weekday. Across the bridge in Potomac Yard, Regal Cinemas and several big-box retailers bring plenty of evening and weekend traffic, but the office market is sparse.

Following the merger of JBG and Vornado's D.C. operations, the future of both neighborhoods is now controlled by one developer. JBG Smith has plans to transform them into 24/7 environments and envisions creating a vibrant stretch along Route 1 that would resemble Northern Virginia's original urban corridor. 

“I think it will start to feel more like the R-B Corridor, where you can walk from Rosslyn to Courthouse to Clarendon to Virginia Square to Ballston,” JBG Smith Senior Vice President Matt Ginivan said. “We would love to see the same thing from Pentagon City to Crystal City to Potomac Yard to North Old Town.”  

In North Potomac Yard, JBG Smith is designing its plans to turn the 69-acre power center retail site into a 7.5M SF mixed-use development.

Alexandria recently established a vision for the future of the site when it completed a revised draft of the North Potomac Yard Small Area Plan in June. JBG Smith is preparing the site plan for its 1.3M SF first phase, which it plans to submit by year-end. It would include 200K SF of retail, 115K SF of office, more than 700 residential units and a hotel.

For the retail portion, the developer has gotten strong interest from what Ginivan called "eatertainment" anchors like Pinstripes and Punch Bowl Social. He also hopes to attract local chefs to open creative restaurants that will add variety to the national chains currently on the site. 

The delivery of the first phase is expected to coincide with the opening of the new Potomac Yard Metro station in 2020. Riders exiting the station would walk out to a two-sided retail street, which Ginivan compared to Bethesda Row and the Mosaic District. He said the goal of the first phase is to immediately create a sense of place with a retail main street that will be a catalyst for the rest of the development.

“With those future phases, our vision will be very similar,” Ginivan said. “We will build off the success and continue to expand that immersive environment with a great mix of uses. Each phase will be able to be a little more ambitious.”

Adding the Metro and the new development will help turn what is now a car-centric retail center into an accessible and walkable urban environment, Ginivan said, which he believes will make it a more attractive destination for office tenants. 

Potomac Yard has recently become a magnet for associations. In May 2016, JBG and MRP Realty sold one of the South Potomac Yard parcels to the Institute of Defense Analysis, which plans to build a 400K SF HQ. The National Institute of the Blind is building a new 100K SF building for its HQ on a Potomac Yard site it bought from JBG and MRP, expected to deliver in 2018. NIB in January reached a deal with Kaiser Permanent to lease 40K SF of that building.

Ginivan said he is in talks with another association to buy a piece of Potomac Yard land and build a 100K SF office in a similar deal to IDA and NIB.

"I would say 2017 really has been a turning point in terms of office demand at Potomac Yard," Ginivan said. "Right now, most of the tenant demand we’re seeing has been from associations and institutions that want to own their real estate. I think that speaks to the character of the market where people are seeing this as an opportunity for them to buy into the future of Potomac Yard."

As JBG Smith looks to add office tenants and daytime traffic to the retail-heavy Potomac Yard, it is doing just the opposite up the street in Crystal City. 

The newly formed REIT controls more than 20 Crystal City properties it inherited from the Vornado side of the merger, most of them obsolete office buildings. JBG Smith CEO Matt Kelly has identified the redevelopment of this area as one of the company's top priorities.

It will begin by transforming 1750 Crystal Drive, adding six stories to the building and 120K SF of retail, anchored by an Alamo Drafthouse Cinema. Opening the popular movie theater with a food and beverage menu will be its first step in turning Crystal City from a daytime office market to a retail entertainment destination. 

“On Monday through Friday, there’s so much energy there,” Ginivan said. “What we want to do there is add retail amenities and residential to convince people who work there to live and play there.”  

Owning so much property in these two adjacent neighborhoods could potentially cause one of JBG Smith's projects to cannibalize the other. But since one is starting out as a daytime office market and the other as a big-box retail environment, Ginivan said they should not compete much in the short term, and over the long term they can be integrated into one cohesive mixed-use corridor. 

“That was definitely one of the concerns we wanted to study with regard to the merger. Was there too much conflict between Crystal City and Potomac Yard?” Ginivan said. “The interesting thing we found was that, while we have similar visions for where both markets might want to be 20 or 25 years from now, they’re starting from very different positions.”

Ginivan will discuss JBG Smith's plans for Potomac Yard at Bisnow's Alexandria State of the Market on Wednesday.