A planned move by The Mills Corporation will add 100,000 square feet of office space to an already soft real estate market, but county planners and The Mills current landlord don’t expect trouble in filling a hole in Arlington’s business landscape.
On Feb. 26, Arlington-based business The Mills Corporation announced it would move its corporate headquarters to Chevy Chase, Md., in 2006. The move came at the end of a lengthy search for a new home, and after significant growth, said Mills Corp. Vice President David Douglass, director of corporate communications for the company. “We’ve doubled in size in the last two years, and we anticipate continuing that growth.”
Mills Corporation owns 31 malls scattered across the U.S., Canada and Europe, including Arundel Mills Mall, outside Baltimore, and Potomac Mills Mall, in Dale City. Founded in 1989, the company has made its home in Arlington since 1996, with offices in the Commonwealth Tower in Rosslyn. In 2003, the company reported operating revenues of $371 million.
Since 2001, the Mills’ corporate staff has increased from about 150 people to 300 currently, said Douglass. That led executives to look for a similar increase in office space — an increase they found in the new Chevy Chase Center, on Wisconsin Avenue. The Mills headquarters will move from 100,000 square feet in Rosslyn to 200,000 square feet in Maryland, effective in the second quarter of 2006.
The move to Chevy Chase is unusual in the Washington area real estate market, said Jim Creedon, senior vice president in charge of leasing for Charles E. Smith Commercial Realty, the management company in charge of the Mills’ current home in the Commonwealth Tower. Most local companies would move to either Chevy Chase or Rosslyn from the District, but few moves take office space from Virginia to Maryland.
The extra space comes with more than $1.5 million in financial benefits. Montgomery County will provide a $470,000 grant to the company from a county Economic Development Fund, money that will come in the form of tax credits. The state’s Maryland Economic Development Assistance Fund has approved a $1.16 million loan for the project, money that could become a grant.
Arlington “didn’t offer us any financial incentives,” said Douglass.
<b>COUNTY OFFICIALS DIDN’T KNOW</b> that was what the company wanted, said Terry Holzheimer, director of business investment for Arlington Economic Development. “They never communicated to us that they had any offers from Maryland,” he said.
But the decision to move was no surprise. “They’ve talked about relocating from Arlington periodically,” said Holzheimer. “They’ve had a broker working with them for several months.”
A tenant moving out of 100,000 square feet is about 20 percent of the turnover in business real estate that the county deals with in the course of a year, said Holzheimer. “Half a million square feet turns over every year. That’s the normal comings and goings of the market.”
Despite the size of the vacancy, he didn’t see any problem in finding a new tenant, especially since the vacancy is still 24 months away. As proof, Holzheimer pointed to the former Gannett towers in Rosslyn. After the newspaper corporation announced it would move to McLean, county officials had a year to look for new tenants before the actual move took place.
“In the Gannett situation, we were able to work with the broker and the management company, even though that lease was five or six times the size of the Mills,” said Holzheimer. “I’m pretty confident that we will be able to fill it.”
<b>CREEDON SHARES THAT</b> confidence. Right now, the vacancy rate in Arlington’s real estate market is around 13 percent, Creedon said. But by the time the Mills’ headquarters move, the numbers might not look the same. “You’re talking about a market two years off,” he said. “I think we’re going to see a different market. Not much is coming on line in Arlington, and the markets are generally strong.”
He expected prospective tenants to be eager to fill the Mills’ niche. “I think the space the Mills is in now is going to lease very quickly.”