naiop northern virginia market outlook€¦ · chicago suburban maryland northern virginia...

NAIOP NORTHERN

VIRGINIA

MARKET OUTLOOK

JULY 9, 2013

CBRE | NAIOP NORTHERN VIRGINIA MARKET OUTLOOKCBRE | NAIOP NORTHERN VIRGINIA MARKET OUTLOOK

WHAT HAPPENED?

?

CBRE | NAIOP NORTHERN VIRGINIA MARKET OUTLOOK

2,380

2,400

2,420

2,440

2,460

2,480

2,500

Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13

D.C. METRO EMPLOYMENT

Sources: Moody’s, BLS

D.C.’S ECONOMY SENDS CONFUSING SIGNALS

Metro new home starts explode: highest in 6 years

Gross Metro Product growing, but slower: 1.2% in 2012

People still moving here: Metro adds 36,000 people in 2012

D.C. METRO EMPLOYMENT

Empl

oyee

s, T

hous

ands

, SA


0% 1% 2% 3% 4% 5%

DetroitPittsburgh

PhiladelphiaWashington, DC Metro

MiamiNorthern Virginia

ChicagoBoston

New York CityLos Angeles

San DiegoBaltimoreCharlottePhoenixDenverSeattleDallas

San FranciscoAustin

Houston

BELOW U.S. GROWTH

MODERATE GROWTH

STRONG GROWTH

WE’RE UNCOMFORTABLE

JOB GROWTH: Q1 2013 OVER Q1 2012

Source: BLS


-2 0 2 4 6 8Sources: Moody’s, BLS

NORTHERN VIRGINIA JOB GROWTH

MAY 2013 VS. MAY 2012

STATE & LOCAL GOVERNMENT

FINANCE

PROFESSIONAL SERVICES

LEISURE & HOSPITALITY

EDUCATION & HEALTH

RETAIL

FEDERAL GOVERNMENT

PUBLISHING, TELECOM

MANUFACTURING

Thou

sand

s of

Em

ploy

ees


$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

1985 1990 1995 2000 2005 2010

FEDERAL SPENDING DECLINES FOR FIRST TIME EVER

D.C. METRO PROCUREMENT $

Bill

ions

Sources: Consolidated Federal Funds Report; GMU Center for Regional Analysis, CBRE Research

CBRE | NAIOP NORTHERN VIRGINIA MARKET OUTLOOK7 CBRE | NORTHERN VIRGINIA NAIOP MARKET OUTLOOK

FEDERAL GOVERNMENT LEASING

2011 2012

LEASED SQUARE

FOOTAGE DID NOT CHANGE

TERM IS THE ONLY CHANGE:

SHORT TERM RENEWALS

=+


FEDERAL GOVERNMENT LEASING

FOCUS ON EFFICIENCY

ONE SIZE DOES NOT FIT ALL


NORTHERN VIRGINIA COMMERCIAL REAL ESTATE MARKETS

NORTHERN VIRGINIA

COMMERCIAL REAL ESTATE

MARKETS


ATLANTACHICAGO

SUBURBAN MARYLANDNORTHERN VIRGINIA

CAMBRIDGEHOUSTON

SAN FRANCISCO

BOSTONDFW

DENVER

SEATTLE LOS ANGELESPHILADELPHIA

Source: CBRE Research, Q2 2013

OWNER FAVORABLE

VIRGINIA IS FOR OCCUPIERS

OFFICE MARKETSOCCUPIER FAVORABLE

SAN FRANCISCO

BOSTONMANHATTAN,

MIDTOWN SOUTHSEATTLE

DFWDENVER

HOUSTONMANHATTAN, DOWNTOWN

MANHATTAN, MIDTOWN CHICAGOATLANTA

WASHINGTON, DCLOS ANGELESPHILADELPHIA

SUBU

RBA

N

MA

RK

ET

DO

WN

TOW

NM

AR

KE

T


OFFICE VACANCY SURPASSES 2002?!

16.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1Q98

1Q99

1Q00

1Q01

1Q02

1Q03

1Q04

1Q05

1Q06

1Q07

1Q08

1Q09

1Q10

1Q11

1Q12

1Q13

NORTHERN VIRGINIA


WHERE’S THE OFFICE VACANCY?

PERCENTAGE POINT CHANGE, Q2 2013 VS. Q2 2012

4.7

3.2

2.6

2.0

1.9

-1.6

-2.0

-2.1

-2.3

-3.8

Springfield/Newington (17.9%)

Rosslyn-Ballston (16.8%)

Merrifield (12.0%)

Fairfax City (13.4%)

Fairfax Center (15.7%)

Route 7 (18.8%)

Leesburg (18.4%)

Crystal City (22.1%)

I-395 (20.4%)

Route 29/I-66 (13.8%)

DETERIORATED

IMPROVED


AS A WHOLE, NEWER IS BETTER

22.5%

18.6%

12.5%14.8%

16.6%

0%

5%

10%

15%

20%

25%

-

10

20

30

40

50

60

70

80

90

1970s 1980s 1990s 2000s 2000+

RBA (sq. ft.) Vacancy Rate

Sources: CoStar, CBRE Research

Mill

ions

of S

Q F

T

NORTHERN VIRGINIA OFFICE BUILDINGS


0% 5% 10% 15% 20% 25% 30% 35% 40%

100 SF or less

150 SF

200 SF

250 SF

300 SF

% of responses to survey

20122017

Source: CoreNet Global, Q1 2012.

INCREASING WORKPLACE EFFICIENCIES

AMOUNT OF DEDICATED SQUARE FEET PER OFFICE WORKER


NORTHERN VIRGINIA OFFICE DELIVERIES

0

1

2

3

4

5

6

7

8

9

10

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

1999 – 2001: 25MSF

2006 – 2008: 17MSF

2012 – 2014: 4MSFMill

ions

of S

Q F

T


NORTHERN VIRGINIA INDUSTRIAL:VACANCY RATES STABLE, RENTS RISE

$10.73

$9.73$9.80

$9.71$9.60

$10.04

0%

2%

4%

6%

8%

10%

12%

14%

$9.00

$9.20

$9.40

$9.60

$9.80

$10.00

$10.20

$10.40

$10.60

$10.80

$11.00

2008 2009 2010 2011 2012 Q2 2013

Asking Rental Rate (NNN) Vacancy Rate


D.C. METRO MULTIFAMILY TURNS CORNER

3.8%

4.5%

5.4%

3.9% 4.0% 4.0%4.5%

5.3%5.0% 4.9% 4.9%

0%

1%

2%

3%

4%

5%

6%

$(2.50)

$(2.00)

$(1.50)

$(1.00)

$(0.50)

$-

$0.50

$1.00

$1.50

$2.00

$2.50

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Real Rent per Unit, Annual Change Vacancy Rate

Source: CBRE Econometric Advisors, Q2 2013.


OUTLOOK

OUTLOOK


GROWTH STILL IN THE FORECAST FOR D.C. METRO

GROSS METRO PRODUCT EMPLOYMENT GROWTH

2013: 22,1002014: 30,1002015: 54,400

2013: 1.3%2014: 3.0%2015: 3.4%

$

Source: Moody’s


FEDERAL SPENDING UP AT END OF 2014

Source: Office of Management & Budget, May 2013

U.S. DISCRETIONARY OUTLAYS

$1.10

$1.15

$1.20

$1.25

$1.30

$1.35

$1.40

$1.45

$1.50

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

$ Tr

illio

ns


OFFICE VACANCIES REMAIN HIGH

HOW TO ATTACK VACANCY?

REPOSITION

REDEVELOP INTO OFFICE BUILDING

REDEVELOP INTO APARTMENT BUILDING


-236,130 -240,582

-488,667

-57,527-103,113

170,011

77,273

-600,000

-500,000

-400,000

-300,000

-200,000

-100,000

0

100,000

200,000

300,000

2007 2008 2009 2010 2011 2012 2013 YTD

SOME AREAS SEE IMPROVEMENTN

et A

bsor

ptio

n (S

F)

TYSONS CORNER


MAIN STREET FAIRNESS ACT

CHANGES TO RETAIL & INDUSTRIAL

U.S. E-COMMERCE SALES IN Q1 2013

$61B

ANNUAL INCREASE IN E-COMMERCE SALES

16%


It’s going to get slightly worse before it gets better…

WHAT’S YOUR VIEW?

We’re getting there…


TEXT

TEXT

Jeffrey KottmeierDirector, Research & Analysis

+1 202 783 [email protected]

www.cbre.com/dc

naiop northern virginia market outlook€¦ · chicago suburban maryland northern virginia...

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