Reston's Vibrant Economy Part 23: Comstock FAIL, as the kids like to say, plus office space hits the mauve-colored wall

Awesome Reston homebuilder Comstock appears to be poised to collapse into itself like a dying sun. At least that's our layperson's grasp of this story, which uses lots of complex terms like "notices of default" and "sharehodler risk."

Comstock Homebuilding of Reston has defaulted on several development loans the company used to finance its projects during the years of the housing boom.

The company is hoping to renegotiate the terms of its loans with several banks, but some analysts warned that the company's future is cloudy.

"Comstock Homebuilding Company's ability to exist as a going concern is the primary risk to shareholders," Christopher R. Lucas, a senior real estate analyst in the Tysons Corner office of the investment firm Robert W. Baird, said in a July report, before Baird ceased covering the company. Lucas added that that the weak housing market and slumping economy "create a difficult operating environment for Comstock."

Comstock has received notices of default or demands for repayment from five lenders over the past two months, according to filings with the Securities and Exchange Commission. The company owes the banks about $86.5 million, according to the filings.

Is that kind of like when credit card companies start calling your house at odd hours, all friendly at first but then more insistent and eventually downright threatening as they attempt to get you to make good on your delinquent $23.75 Visa bill? Not that we'd know anything about that, of course.

But we digress. Meanwhile, Reston's commercial office space market appears to be headed off the cliff as well.

Although Washington's economy is still growing, with a 3.9 percent unemployment rate and 25,300 jobs added in June, the pace has slowed. That has made the companies that lease office space more cautious and less willing to take new space.

A total of 6.5 million square feet of office space was leased throughout the Washington area in the second quarter, a 10 percent decline from the same period last year, according to the Bethesda research firm CoStar. The majority of those deals were tenants renewing their leases, said John Sikaitis, research director for the Washington area office of Jones Lang LaSalle.

The Reston and Herndon area, which in the past few years has seen a wave of speculative development (development with no tenants lined up), saw its vacancy rate jump to 16.7 percent from 11.1 percent, with asking rents declining 1.2 percent from $31.45 to $31.07 a square foot. New projects there are unlikely, Zialcita said.

Does that mean the Macaroni Grill is safe for now? We can only hope. Maybe not, though, since developers there have been sending out press releases claiming the recession doesn't exist, at least not in Reston Town Center.

At a glance, it looks ominous: a 650,000-square-foot speculative office project in Northern Virginia, with top-dollar asking rents and no metrorail within 10 miles, delivering into a saturated market amid the bleakest U.S. economic forecast in years.

The project is South of Market, a three-building complex that Boston Properties opened several months ago at Reston Town Center, the massive urban-core of Reston, VA.

Yet, even as a number of recently constructed office buildings in the area sit vacant, South of Market has survived and even thrived since the credit markets froze 10 months ago. The project is roughly 90 percent leased or committed, far outpacing the broader Dulles Corridor area (comprised mainly of Reston and Herndon), which saw vacancy spike to nearly 20 percent last quarter.

Much of the space at South of Market was leased before the credit crunch, including big deals with Serco, an IT services group, and telecommunications firm NII Holdings.

But leasing has been surprisingly robust over the past year under what many observers have termed tough and deteriorating market conditions. Rolls Royce opened its North America headquarters at South of Market this month after agreeing to relocate from Chantilly, southwest of Reston, in December, while other blocks of space recently went to aerospace group International Launch Services, Internet metrics agency comScore Networks, online mortgage tracker MERS, and Google.

And, in one of Northern Virginia's largest leases this year, SAT test administrator The College Board took close to 200,000 square feet at the fourth South of Market building, a 235,000-square-foot structure known as Democracy Tower that is now under construction.

"These are firms that care about the image they project," said Joe Ritchey, the principal of Prospective Inc., who has played an active role in leasing and marketing several projects over the past two decades at Reston Town Center. "The firms that come to Reston Town Center brand Reston Town Center, but they're also branded by it."

What a great slogan! Reston Town Center: Brand or Be Branded.