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Northern Virginia 3Q12 Office Snapshot

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3Q Office Market Report

3Q Office Market Report

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  • 1. Office Market Snapshot Northern Virginia • Third Quarter • 2012 Market Tracker Vacancy Net Absorption Deliveries Asking Rent *Arrows = Current Qtr Trend 16.0% (342,000) SF 0 SF $31.69 FS BRAC Moves Aside, Northern Virginia Office Shows Signs of Growth The Northern Virginia office market exhibited balanced growth in pockets across the region in the third quarter of the year. Negative overall demand contributed to a 0.2 percentage point increase in total vacancy from the second quarter, bringing the rate to 16.0%. Continued government relocations and large-scale corporate consolidations outweighed new demand over the period, contributing to the negative 342,000 square feet of net absorption during the third quarter. This brings net absorption for the firstNORTHERN VIRGINIA OFFICE three quarters of 2012 to negative 1.7 million square feet. Nearly all of the negative absorption can be attributed to BRAC. Setting BRAC-related moves aside, demand forEconomic Indicators office space would have been positive 432,000 square feet in 2012. Q3 12 Q3 11 The velocity of BRAC-related move-outs slowed during the third quarter as BRAC tenants vacated 557,000 square feet, primarily inside the Beltway, adding to the 1.5 millionDC Metro Employment 2.5M 2.4M square feet returned in the first half of 2012. The relocations continued to affect markets near the Pentagon the greatest, driving overall vacancy up in Crystal City by 3.3DC Metro Unemployment 5.5% 6.0% percentage points and in the I-395 Corridor by 2.0 percentage points.U.S. Unemployment 8.2% 9.7% Inside and outside the Beltway, well-located quality inventory continued to attract new tenants during the third quarter. Professional services and government tenants drove theU.S. CCI 65.64 50.26 majority of leasing activity in Arlington, with new leases signed in Crystal City by the Department of Homeland Security and the U.S. Agency for International Development (USAID) and in the Rosslyn/Ballston Corridor from private sector tenants including MILNet Absorption Corporation, MCG Capital, and Evolent Health, which leased 33,000 square feet at the newly-delivered 800 N Glebe Road. Outside the Beltway, the technology and government 3 2 contracting sectors continued to be fundamental drivers for growth along the Toll Road.Square Feet (Millions) 2 Major tech-company leases included those for Transaction Network Services, Inc. which 1 1 signed for 120,000 square feet at Parkridge 6 in Reston (which delivered in 2008) and 0 VMWare which leased 53,000 square feet at Reston Executive Center. Also in Reston, -1 reinforced Earth and Network Alliance, Inc. leased a combined 27,000 square feet at the -1 -2 recently-renovated Reston Corner I. -2 2007 2008 2009 2010 2011 YTD Overall, average asking rents continued to press upward, rising 16 cents since June to 2012 $31.69, full-service at the end of the third quarter. With no new deliveries in the third quarter and 444,000 square feet of new space scheduled to deliver by the end of the year already 34% preleased, a limited supply pipeline will aid rent growth in the near term forVacancy Rate high-quality spaces in the region.17% Historical Average Forecast15%13% • The uncertainty surrounding the possibility of sequestration and federal procurement as11% a result of budget legislation continue to be sources of concern for government 9% contractors in the DC area. Once new spending legislation is agreed upon in Congress, 7% related businesses will likely be more amenable to facilitating growth. 5% 2007 2008 2009 2010 2011 YTD • In Arlington and Alexandria, BRAC-related relocations will continue to weigh on 2012 second-generation spaces, with the moves gradually slowing in momentum after 2012. • Tysons Corner has begun its transformation into a transit-oriented environment with multiple mixed-use developments under construction, Phase I of the Silver Line (more than 75% complete) and the I-495 Express Lanes expected to open by December of 2012. www.cassidyturley.com
  • 2. Cassidy Turley Office Market SnapshotNorthern Virginia • Third Quarter • 2012 SUBLET TOTAL VACANCY CURRENT NET YTD NET UNDER CON- AVERAGE TOTAL BLDGS INVENTORY VACANT VACANT RATE ABSORPTION ABSORPTION STRUCTION ASKING RENT Submarket Rosslyn 40 8,471,170 168,635 1,238,440 14.6% (35,794) (81,105) 638,041 $43.22 Clarendon/Courthouse 38 4,655,208 442,992 526,725 11.3% 100,918 145,366 196,592 $42.41 Virginia Square 16 1,125,812 69,220 345,225 30.7% (18,025) (222,340) - $37.49 Ballston 37 7,642,378 75,371 841,199 11.0% (106,525) 358,116 - $43.77 Crystal City 40 11,095,758 47,794 2,537,138 22.9% (366,538) (1,445,176) - $39.78 Pentagon City 6 1,449,379 0 256,849 17.7% 0 (239,303) - - Arlington County 177 34,439,705 804,012 5,745,576 16.7% (425,964) (1,484,442) 834,633 $41.49 R/B Corridor** 131 21,894,568 756,218 2,951,589 13.5% (59,426) 200,037 834,633 $42.77 Old Town 164 8,294,734 152,314 1,145,352 13.8% 9,644 46,722 - $32.47 Eisenhower 27 4,883,598 9,950 273,143 5.6% 35,575 (27,554) - $29.38 I-395**** 64 7,986,855 105,171 2,285,145 28.6% (161,475) (390,505) - $32.26 Alexandria 386 21,165,187 267,435 3,703,640 17.5% (116,256) (371,337) - $32.17 Inside the Beltway* 563 55,604,892 1,071,447 9,449,216 17.0% (542,220) (1,855,779) 834,633 $38.31 Tysons Corner 174 25,695,101 324,265 4,288,492 16.7% 31,137 1,106 982,579 $29.93 Reston 177 18,127,126 288,598 2,837,868 15.7% 109,514 100,723 - $28.29 Herndon 126 11,737,088 187,719 1,665,568 14.2% (101,521) (140,796) - $27.11 Merrifield 92 7,865,633 155,274 1,062,678 13.5% (58,275) (21,291) - $29.86 Vienna 25 1,219,275 0 96,562 7.9% 4,878 (2,144) - $22.68 Oakton 15 1,074,909 5,000 251,663 23.4% 26,605 (7,735) - $26.80 Fairfax Center 64 6,557,950 143,671 988,512 15.1% 77,025 176,031 - $26.15 Fairfax City 83 3,352,765 25,116 415,975 12.4% 29,695 14,856 - $22.57 28 South 141 12,697,445 200,856 1,960,423 15.4% 10,362 3,735 104,000 $25.67 Springfield/Newington**** 63 4,855,552 98,775 643,985 13.3% 54,961 78,936 237,753 $31.61 Fairfax County 960 93,182,844 1,429,274 14,211,726 15.3% 184,381 203,421 1,324,332 $28.02 50/66*** 279 20,070,532 329,061 2,815,390 14.0% 79,928 159,717 - $27.20 28 North 79 6,111,883 5,550 815,597 13.3% 5,064 124,833 - $23.31 Route 7 78 4,144,726 13,765 1,026,402 24.8% 9,266 (131,444) - $24.51 Leesburg 28 1,048,948 0 178,840 17.0% 1,979 (7,059) - $24.17 Loudoun County 185 11,305,557 19,315 2,020,839 17.9% 16,309 (13,670) - $23.96 Outside the Beltway* 1,145 104,488,401 1,448,589 16,232,565 15.5% 200,690 189,751 1,324,332 $27.69 TOTAL 1,708 160,093,293 2,520,036 25,681,781 16.0% (341,530) (1,666,028) 2,158,965 $31.69*Inside the Beltway is comprised of Arlington County and Alexandria/Outside the Beltway is comprised of Fairfax and Loudoun Counties **The Rosslyn/Ballston (R/B) corridor is comprised of Rosslyn, Clarendon/Courthouse, Virginia Square, and Ballston submarkets. ***The 50/66 corridor is comprised of Merrifield, Vienna, Oakton, Fairfax Center, and Fairfax City submarkets.****The I-395 and Springfield/Newington Submarkets were updated in the second quarter of 2012 with additional inventory p- preliminaryKey Lease Transactions 3Q 12 Colin C. Hartley PROPERTY SF TENANT TRANSACTION TYPE SUBMARKET Market Analyst, VA Region 7940 Jones Branch Drive 160,000 Logistics Management Institute (LMI) New* Tysons Corner 2101 L Street, NW 13530 Dulles Technology Drive 124,000 Lockheed Martin Renewal Herndon Suite 700 10740 Parkridge Boulevard 120,000 Transaction Network Services (TNS) New Reston Washington, DC 20037 Tel: 202.463.2100 1100 Wilson Boulevard 115,000 Raytheon Renewal Rosslyn Fax: 202.223.2989*Transaction included purchase and lease agreements totaling 160,000 square feet. Colin.Hartley@cassidyturley.com The information contained within this report isAbout Cassidy Turley gathered from multiple sources considered to be reliable. The information may contain errors orCassidy Turley is a leading commercial real estate services provider with more than 3,600 professionals in more than 60 offices nationwide. The omissions and is presented without any warrantycompany represents a wide range of clients—from small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm or representations as to its accuracy. completed transactions valued at $22 billion in 2011, manages 455 million square feet on behalf of institutional, corporate and private clients andsupports more than 28,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated Copyright © 2012 Cassidy Turley.commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project All rights reserved.and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside of North America through apartnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com formore information about Cassidy Turley. www.cassidyturley.com

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