By Caitlyn Meisner | email@example.com
The U.S. Patent and Trademark Office is downsizing its office space in Carlyle, which has contributed to the building’s owner, LCOR, receiving a Moody’s “junk bond” rating. Alexandria business leaders and city officials nonetheless argue the move will have minimal impact on Alexandria’s economy. The PTO is downsizing its real estate profile due to the increase in remote work since the start of the COVID-19 pandemic in 2020. A spokesperson for the federal agency said the PTO is constantly assessing its profile and reducing its commitment when-ever possible.
“We are committed to being responsible stewards of our properties and our stakeholder fees will continue to serve the American public,” Paul Fucito, PTO press secretary, said.
The reason for this is PTO employees largely work remotely. While many have always worked outside the office, the pandemic accelerated this trend.
The PTO relocated to Alexandria from Crystal City in Arlington in 2005. Since then, the Carlyle neighborhood and Eisenhower Avenue – both of which border the PTO office complex – have developed greatly. The office consolidated from 18 buildings in Arlington to a complex of five buildings in Alexandria.
In Carlyle, several projects that had been underway for years have recently opened, including hundreds of residential units, retail stores, grocery stores and parking garages. The Washington Metropolitan Area Transit Authority Virginia headquarters also mo-ved into the neighborhood in 2005.
Elizabeth Bolton, vice president of strategic communications of the Alexandria Economic Development Partnership, said new businesses continue to move to the area surrounding the PTO complex. She noted Wegmans, Five Guys and Atlas Brew Works as just a few new tenants since the COVID-19 pandemic began.
Stephanie Landrum, president and CEO of AEDP, said AEDP is working with the city to fill the space with new tenants in the coming years.
“The continued commercial and residential growth in Carlyle and Eisenhower speak to how successful bringing the Patent Office to Alexandria has been and how vibrant the neighborhood will continue to be,” Landrum said in a statement to the Times. “The quality of the buildings and their location on top of transit are what the post-COVID market demands.”
Bolton said AEDP has an entire team dedicated to finding new tenants for the vacant PTO buildings.
“There’s a lot of options for the building and it’s ultimately up to the owner who they want inside of it,” Bolton said. “They’re going to be the drivers in what happens to this building.”
The owners of the buildings that comprise the PTO campus, LCOR Alexandria LLC, a subsidiary of LCOR, is the largest commercial taxpayer in the city, according to the Washington Business Journal. LCOR is a real estate investment and development firm with properties from Florida to Massachusetts.
Joseph Haggerty, CEO of Alexandria’s chamber of commerce, said he was not too concerned with the PTO’s downsizing. He said local businesses – mainly nearby restaurants – have been impacted, but that is also due to the pandemic.
“The lease will mostly impact (LCOR Alexandria),” Haggerty said. “The amount of business has dropped significantly [since the pandemic] and it hasn’t come back since.”
Haggerty said it was unclear whether businesses have moved out since 2020 because most do so with-out “announcement.”
Bolton said businesses obviously have struggled since March 2020, but that many have been incredibly resilient in the wake of the government-ordered shutdowns in the wake of the COVID-19 pandemic. She added the convenience of the King Street Metro station makes the neighborhood desirable and its businesses accessible.
“I don’t want to discount what we were all going through in 2020, but we’re three years out from PTO going home and I think we feel pretty good about the growth in the neighborhoods surrounding it and the foot traffic that continues to support the smaller businesses that are over there,” Bolton said.
Moody’s Investors Services downgraded LCOR’s $60.2 million bonds, which are now considered at a “junk bond” status. If PTO does not further renew their lease in the coming decades or further downsizes, debt repayment and restructuring becomes unlikely.
Kendel Taylor, director of finance for the city, said with the city’s $900 million operating budget, LCOR Alexandria will not have much of an impact.
“No single taxpayer impacts [the city],” Taylor said. “We have a very diverse revenue basis.”
Taylor also said the taxes will be paid if LCOR Alexandria leaves the city and she does not anticipate any impact on the city. She said taxes are paid in full and are paid at this time.
Bolton said AEDP is not worried about this issue, as it does not signal the “end of the world.” She said more information will become available in five years when the lease is up for renewal, but for now, this is normal in real estate.
“Our tax base is very heavily residential,” Bolton said. “There are other commercial users who are propping up the tax base in a way that the federal government doesn’t because it doesn’t pay the same kind of taxes. There’s property taxes on the building LCOR pays. It’s still going to be the biggest lease in Alexandria for the next [few] years.”
She also said the move to remote work is not strictly localized to Alexandria, but an adjustment for the entire nation. Bolton said since the city has diversified its economy and not relied on the federal government, the city is in good shape.
“Every jurisdiction everywhere in the country is facing lower than usual office numbers and office renewals, and it’s going to be a couple of years until that kind of shakes out,” Bolton said. “We’re not shying away from that reality, but we are so strong … and lucky in this region.”
Bolton added that it would be noticeable if the city was in danger, particularly if residents were fleeing the city or businesses were leaving in droves. She said to combat this, it’s important for the city to transition empty office spaces into residential uses.
“Our vacancy rate [of buildings] is going to stay stable because we’re going to adjust the supply of offices here too, which then continues to help the Carlyle neighborhood,” Bolton said.