Thirty days after buying Port America, a mile-long waterfront property along the Potomac River in Prince George’s County, Md., Steven Peterson’s father, Milton, turned to him and said, “Now what do you want to do?” Now the president of The Peterson Companies and in control of the multi-billion-dollar property known as National Harbor, Peterson’s initial response was, “I don’t know.”
That turned out to be the right answer and one that he and the rest of the team at the full-service real estate company use quite often when deciding what to do with the 10.5 million-square-foot property that, when all is said and done, will be a $4 billion to $5 billion destination waterfront city. But Taylor Chess, SVP of operations for Peterson Companies, said the approach is not as loosey-goosey as it might sound.
“The overlying vision of National Harbor was always to be a destination waterfront resort, but its specific uses can change over time depending on who shows up at the door to participate,” he said.
“The fun part about National Harbor is predicting what it’s going to be,” followed Peterson. With five hotels, a Wyndham Vacation Resort, and Gaylord National Resort and Convention Center, National Harbor offers 3,000 guestrooms. With 22 restaurants, including four inside the Gaylord National, white tablecloth and quick-service restaurants, a banquet facility, and late-night entertainment venues, it also offers approximately 300,000 square feet of retail, dining, and entertainment space.
In addition, National Harbor houses 450 condominiums, 350 rental residences now in development, and 180,000 square feet of office space, and that’s just what’s been accomplished over the last three years; only 4 million square feet of the space is currently built out, which is approximately one-third of the 350-acre property. When all is said and done, the overall density of the project will total 10.5 million square feet.
“National Harbor is a gateway of opportunities for shopping, dining, and lodging,” said Kent Digby, vice president and director of operations for National Harbor. “As we create this city, we’re creating a tremendous opportunity to reintroduce Prince George’s County to its region and the rest of the country.”
When Peterson and his father looked at the property that was to become National Harbor 15 years ago, they saw a lot of potential, but almost too much. They started their development journey by traveling the country, looking at other harbor side developments to see which would be the best fit for their property.
Peterson said the plans for the property would change daily until they decided to go with what Peterson Companies is best at: mixed-use developments. “We’re a full-service real estate company,” said Peterson. From offices to retail, residential, industrial, lifestyle centers, grocery-anchored centers, and government offices, over the last 40 years, Peterson Companies has evolved as its community’s needs have evolved. It takes the same approach when dealing with National Harbor.
“At one point, we were quietly dealing with Disney to do a theme park, and we talked to Lego as well,” Peterson said. “Today, Kent is dealing with several promotional groups to bring events and attractions to National Harbor that can bring over a half a million people to the site this year, and many of those opportunities walked in off the street. We’re still not sure what will happen next.”
The focus of the property evolves with the needs of its surrounding community and with what would attract people to the area. Last year, more than 8 million people visited National Harbor. As for the future, “Steven and Milton like to say this is a 12-chapter book, and we’re on the second chapter,” said Chess.
Peterson Companies’ market-driven approach to managing the 5 million square feet of retail property it has in the Metro DC area has also worked for National Harbor. The company conducted studies and talked to people on the streets about how often they return to the resort after that initial visit. The response showed that once people come, they tend to repeat their trip up to 10 times a year.
When developing the new rental development, Peterson Companies made a conscious decision to fill in what Peterson calls the last residential food group. National Harbor already has condos, townhouses, and single-family residences, but the community started asking if there were rental opportunities as well.
“We knew there was built-up demand,” said Peterson. The rental property is only one piece of the National Harbor puzzle that makes it unique. Compared to a traditional city in which landlords control only a portion, National Harbor is controlled by one management group, Peterson Companies, and is built around what is best for the property as a whole versus what’s best for a certain portion.
“A new building is managed and marketed for its benefit to the entire property,” said Digby, who Peterson and Chess refer to as the mayor of National Harbor. “It gives us a great opportunity to put out our story collectively and market to other retailers.”
Such an approach also presents challenges, Digby said. “We’ve focused on trying to understand the waterfronts, marinas, and hotels and how they work in the project and with our marketing strategies, but they change on a daily basis. The challenge comes from the variables and figuring out how to maximize them for the benefit of all.”
In this way, there is no one anchor tenant to National Harbor, although the eventual additions of a Disney resort and a Children’s Museum are sure to attract millions. Instead, the resort is the anchor, and as the property moved from concept into development over the last three years, this holistic approach served both Peterson Companies and National Harbor well.
“When you open a project such as this, you have to do so with critical mass,” said Peterson. “Once that bus started, it needed to keep going.” With Gaylord Convention Center pulling in business clients and a strong marketing team, headed by Rocell Viniard, vice president and director of marketing for National Harbor, drawing attention to the project’s other amenities, every hotel and restaurant has been successful since day one.
“Although it has been a turbulent market and leasing of the space has gone slower than we had once hoped, it is moving forward, and we are experiencing good traffic,” said Chess. Peterson followed by saying the true mark of National Harbor’s success would be when it “gets Metro on the beltway. That will signal that it has its own life.”
Although National Harbor is only on chapter two of its 12-chapter book, Peterson said now that the economy is settling, the real fun will start. “When you start picking and choosing what uses you want is when it’s fun to be a developer,” he said.
“We have to be careful of who we choose and what we bring into the development. How we bring in more offices and how we distributed the residential component in that third food group of rental residential were major components,” Peterson continued. “Now we’re just building on each of the uses already in existence.”