The deal is for 196,000 square feet in a new office tower that will also be occupied by Fannie Mae starting in 2022. The space is part of a development (also known as Reston Next) which will expand Reston Town Center with over four million square feet of mixed use space. Construction is currently underway on its first phase, which includes two office towers, a hotel, and a planned residential skyscraper.
The fact that Volkswagen Group of America has been looking to expand its presence in Reston was made obvious due to a suspicious inclusion in marketing materials released earlier this year. It was speculated here at the time that Volkswagen was looking at the nearby Halley Rise development for its new space, and its likely that the graphic (pictured below) was produced for Brookfield Properties during discussions.
Ultimately, any deal being explored with Brookfield did not pan out, as it is now publicly known that Volkswagen is signing with Boston Properties instead. The office building at Halley Rise will not deliver until 2023 at the earliest, while Reston Gateway will be ready for occupancy in 2022. However, Volkswagen announced in its press release that the move will not happen until late 2023, so the delivery date may not have had much of an impact.
What will happen to the current Volkswagen lease at Woodland Park? In the press release, Volkswagen Group of America CEO was quoted to state that this would bring its “team under one roof,” but the new lease of 196,000 square feet is roughly the same size as the current headquarters building (191,870 sq ft). The current building lease is also shared with Volkswagen Credit, and it is possible that Volkswagen will continue to house its credit unit there, while possibly consolidating further its leased space on Corporate Park Drive.
It has been a productive year for Boston Properties at Reston Town Center, with already a deal with Microsoft on the books. With this latest lease signing, the newest pair of towers—one of which is Reston’s tallest building—is already 85% pre-leased with over a year left before delivery.
October 28 Update: BXP held an earnings call today and elaborated a bit on the Volkswagen deal. Apparently VW was initially interested in Reston Gateway before, but due to Fannie Mae’s 850,000 square foot lease, there was not enough room. When Fannie Mae exercised an option to reduce its lease there, the developer made another offer and this time Volkswagen accepted. Doug Linde, President of Boston Properties, also noted that Volkswagen had already signed a letter of intent for another property (possibly Halley Rise?) before making the final decision to look at Reston Gateway again.
Ray Ritchey of Boston Properties stated that the decision was based on the “quality of the location, its visibility, access to metro and amenities.” So timing or economics seem to have had little to do with it.