real estate outlook northern virginia office market...2 real estate outlook northern virginia office...

NORTHERN VIRGINIA OFFICE MARKETFOURTH QUARTER 2015

REAL ESTATE OUTLOOK

The Northern Virginia office market experienced healthy conditions during the fourth quarter of 2015, as the direct vacancy rate edged down 20 basis points to 16.0% and net absorption was positive 429,000 SF driven by leasing activity in the Class B/C market. Asking rents stabilized during the fourth quarter, but declined 1.1% since year-end 2014. We project demand will gradually rise over the next several years, driven by the tech sector and interest surrounding the recently opened Silver Line. However, progress will be sluggish compared to past recovery cycles.

ECONOMY

Growth in professional/business services fueled by the tech sector Payroll employment increased 31,900 during the 12 months ending October 2015 in Northern Virginia, which is above the 20-year annual average of 24,900. The professional/business services sector grew 9,300 of these jobs during the past 12 months, with the computer systems design sub-sector accounting for 53% of these jobs. After job cuts during 2013 and 2014, the professional/business services sector is gaining steam, particularly in the tech sector. The leisure/hospitality sector followed with 8,000 new jobs, with the food services sub-sector accounting for 81% of these jobs.

The Northern Virginia unemployment rate is the lowest in the Washington metro area at 3.4% at October 2015, down from 3.9% one year ago. The unemployment rate is below the 10-year average of 3.9%. This compares to the Washington metro area unemployment rate of 4.3% and the national rate of 5.0% at October.

We expect conditions to pick up during 2016 and 2017, as consumer and business confidence strengthens to fuel the Northern Virginia economy. Through 2019, we expect job growth to average 21,000, with the strongest job growth occurring during 2016 and 2017. We expect the health, technology, construction, and food services industries to fuel job growth in the period ahead.

Office market strengthens during Q4 Demand driven by handful of mid-sized deals

OFFICE TRENDS

10-YEAR TREND FOURTH QUARTER 2015

OVER ALL VACANCY

16.0%Vacancy rate ticks down

ABSORPTION

464,000 SFDemand picking up, but below 10-yr average

RENTAL R ATES

$31.02 PSFDown 1.1% during 2015

UNDER CONSTRUCTION

3.6 Million SFConstruction pipeline controlled

JOB GROW TH

31,900 JobsDuring 12-months ending October 2015

2 REAL ESTATE OUTLOOK NORTHERN VIRGINIA OFFICE MARKET Q4 2015


OFFICE VACANCY AND DEMAND

Class A sets tone for healthy year Northern Virginia’s direct vacancy rate was 16.0% at December 2015, down 20 basis points from three months prior. This is still well above the 10-year average of 11.8%.

The Class A direct vacancy rate increased slightly to 13.2% at December 2015, from 13.1% at September 2015. Despite this, the rate is down 70 basis points from year-end 2014. The Class B/C direct vacancy rate decreased to 17.5% at December 2015, down 30 basis points from three months prior.

Net absorption totaled positive 429,000 SF during the fourth quarter of 2015, compared to a revised negative 199,000 SF during the third quarter. Of note, the third quarter data was revised given the termination of the 625,000 SF Transportation Security Administration deal, which occurred during the fourth quarter.

During 2015, net absorption totaled 464,000 SF. This compares to the 10-year annual average of positive 1.0 million SF. Class A accounted for 680,000 SF, compared to negative 216,000 SF for Class B/C space.

The Tysons Corner submarket was the leader in net absorption during the past three months due to several mid-size deals including Kettler Management Corporation taking 34,200 SF at 8255 Greensboro Drive and TD Bank leasing 22,300 SF at 1919 Gallows Road. Other notable deals for the quarter include Fairfax County School Board taking 129,000 SF at 8270 Willow Oaks Corporate Drive in Merrifield and Tetra Tech AMT taking 60,000 SF at 1515 Wilson Boulevard in the RCB Corridor.

The gain for the Northern Virginia office market was offset slightly by a handful of notable move-outs. For example, BAE Systems vacated 157,000 SF at 2525 Network Place in Herndon and General Dynamics vacated 47,000 SF at 8270 Willow Oaks Corporate Drive in Merrifield.

During 2015, the tech sector represented the largest share of leasing activity at 23% of total leasing for new or relet deals. This was due to several mid-sized deals such as DLT Solutions inking 40,000 SF in Herndon earlier this year. Following was the professional and business services sector and financial sector, both representing 19% of total activity.

OFFICE SUPPLY AND DEVELOPMENT

Construction pipeline expands and is well pre-leased There were three office deliveries during the fourth quarter of 2015. Merritt Properties delivered 32,700 SF at 20193 Ashbrook Place in Loudon County for Geico’s Claims Training Center. HCA Holdings completed 95,000 SF at 24430 Gum Springs Road in Aldie that was delivered vacant. Lastly, a 20,700 SF office

UNEMPLOYMENT RATE

PAYROLL JOB GROWTH

NORTHERN VIRGINIA OFFICE NET ABSORPTION AND VACANCY

UNITED STATES WASHINGTON METRO AREA NORTHERN VIRGINIA

0%

2%

4%

6%

8%

10%

12%

05 06 07 08 09 10 11 12 13 14 15*

UNITED STATES WASHINGTON METRO AREA NORTHERN VIRGINIA

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

05 06 07 08 09 10 11 12 13 14 15*

NET ABSORPTION IN MILLIONS DIRECT VACANCY RATE

4%

6%

8%

10%

12%

14%

16%

18%

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

06 07 08 09 10 11 12 13 14 15*

*At October 2015SOURCE: Bureau of Labor Statistics, Transwestern

*12 months ending October 2015SOURCE: Bureau of Labor Statistics, Transwestern

*At fourth quarter 2015SOURCE: CoStar, Transwestern

REAL ESTATE OUTLOOK NORTHERN VIRGINIA OFFICE MARKET Q4 2015 3

NORTHERN VIRGINIA OFFICE ASKING RENTAL RATES

$15

$20

$25

$30

$35

$40

06 07 08 09 10 11 12 13 14 15*

CLASS A CLASS B/C


NORTHERN VIRGINIA OFFICE DEVELOPMENT PIPELINE IN MILLIONS

COMPLETED UNDER CONSTRUCTION PRE-LEASED UNDER CONSTRUCTION AVAILABLE

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

06 07 08 09 10 11 12 13 14 15 16*

*Completed YTDSOURCE: CoStar, Transwestern

condo building was built at 4290 Chain Bridge Road in the Oakton/Fairfax City submarket. A total of 755,000 SF delivered during 2015 at 8% leased upon delivery.

There is 3.6 million SF of office space under construction or renovation in Northern Virginia at December 2015. The pipeline is currently 82% pre-leased, well above the 10-year average pre-lease rate of 47%. The pipeline has expanded since year-end 2014 when 2.0 million SF was underway at 50% pre-leased. Tysons Corner has the greatest amount of space under construction at December 2015, totaling 1.8 million SF at 80% pre-leased. This is highlighted by 975,000 SF at Capital One Drive N, which will deliver in 2018 and be Capital One’s new headquarters. Also notable is MITRE’s build-to-suit of 340,000 SF at 7598 Colshire Drive. This project is due to delivery by fall 2016.

We project demand will gradually rise over the next several years, driven by the tech sector and interest surrounding the recently opened Silver Line. However, progress will be sluggish compared to past recovery cycles.

OFFICE PROJECTED SUPPLY VS. DEMAND

Overall vacancy rate to decline We project the overall Northern Virginia vacancy rate to edge down to the high-15% range by year-end 2017, from 16.8% today. We expect the overall vacancy rate to decline on average 40 basis points per year through year-end 2017. This compares to a 150 basis point decline per year during the past two recovery periods.

The decline in vacancy is sluggish compared to past recovery periods due to several factors. The first is tenant uncertainty. Although the federal government has signed a budget deal that will alleviate some of the sequestration pressure, the deal is a short-term solution to a longer term problem as the looming deficit remains an issue. We expect tenants to gain greater certainty about the economy over the next two years and therefore be more apt to lease office space. The second factor is densification. Tenants that are leasing office space are typically reducing the amount of square feet leased per employee by approximately 15% to 20%.

4 REAL ESTATE OUTLOOK NORTHERN VIRGINIA OFFICE MARKET Q4 2015


OFFICE RENTAL R ATES

Asking rents flat during Q4The Northern Virginia average asking rental rate was $31.02 PSF at December 2015, remaining flat compared to three months prior. Class A office rents averaged $33.66 PSF, while Class B/C rents averaged $28.49 PSF. Asking rents decreased 1.1% during all of 2015.

We expect asking rents will stabilize during 2016, possibly edging up 0.5% to 1.5%. Landlords continue to offer generous concession packages in order to compete for tenants. For a typical 10-year term for a new lease, tenant improvement allowances averaged around $68.00 PSF with 11.9 months of free rent for deals inked since the start of 2015. Concessions are on par with 2014 levels which averaged $68.00 in tenant improvement allowances and 10.5 months in free rent. Effective rents will remain under pressure in the near term due to elevated concession packages.

OFFICE INVESTMENT MARKET

Investment activity surpasses 2014 The investment sales volume totaled $2.4 billion or $233 PSF in Northern Virginia during 2015, compared to $2.0 billion at $282 PSF during 2014. Notably, Tamares Group and Ilmarinen Mutual Pension Insurance Company purchased the Gannett buildings at 7950 Jones Branch Drive in the Tysons Corner submarket for $270 million or $343 PSF during the fourth quarter of 2015. In addition, American Real Estate Partners bought 22001 Loudoun County Parkway and 4409 Waxpool Road in Loudoun County for $212.5 million or $118 PSF. Verizon sold these assets in a sale-leaseback.

Investors focused slightly more capital on Class A assets, as this class represented 60% of the total sales volume in 2015. This is in line with 2014 and 2013, when capital invested in Class A product represented 62% and 52% of the total volume, respectively. 40% of the capital invested in 2015 was focused on assets located in highly walkable neighborhoods with access to transportation, retail, and other amenities while 41% of the total sales volume was allocated to car dependent locations.

We expect investment sales in Northern Virginia to pick up during 2016, with a focus on product that is well-located, particularly with proximity to the Silver line and along the Dulles Toll Road. Interest in Class B value-add assets are gaining traction, which suggests the lowered post-recession pricing on suburban assets will start to rise.

OFFICE MARKET OUTLOOK

Office market to strengthen during 2016 We expect the Northern Virginia office market to gradually recover over the next two years. Select tenants are taking advantage of depressed rates and elevated concession packages. Although the Class B/C market picked up during the past three months, net absorption remained negative for 2015. We expect the Class B/C market to remain sluggish during 2016, as tenants continue the flight to quality. Although developers have kept construction levels in-check, we expect construction will continue to grow surrounding the Silver Line and owners will look to renovate older assets to Class A product. Overall, the Northern Virginia office market will remain challenged in the short run and take time to recover. Select submarkets with a relatively low vacancy rate, controlled pipeline and no significant move-outs on the horizon are poised to recover first. n

REAL ESTATE OUTLOOK NORTHERN VIRGINIA OFFICE MARKET Q4 2015 5

Northern Virginia Office Market Construction Activity

SUBMARKET SQUARE FEET UNDER CONSTRUCTION/RENOVATION PERCENT PRE-LEASED

RCB Corridor 719,548 65%

Eisenhower Ave Corridor 700,000 97%

Tysons Corner 1,791,913 80%

Rt. 28 South/Chantilly 160,000 100%

Loudoun County 264,500 92%

Total 3,635,961 82%

SOURCE: CoStar, Transwestern

Northern Virginia Office Market Indicators

PROPERTY CLASS INVENTORYUNDER

CONSTRUCTIONQ4 NET

ABSORPTION2015 NET

ABSORPTIONDIRECT

VACANCYSUBLEASE

SPACEOVERALL

VACANCYAVERAGERATE PSF

Class A 66,607,606 3,615,461 17,000 680,000 13.2% 1.2% 14.4% $33.66

Class B/C 125,455,339 20,500 415,000 (216,000) 17.5% 0.7% 18.1% $28.49

Total 192,062,945 3,635,961 429,000 464,000 16.0% 0.9% 16.8% $31.02


Northern Virginia Office Market Notable Lease Transactions

TENANT DEAL TYPE ADDRESS SUBMARKET SQUARE FEET

GSA - Department of Defense Renewal 2530 Crystal Drive / 2521 S. Clark Street Crystal/Pentagon City 912,000

Fairfax County School Board New Lease 8270 Willow Oaks Corporate Drive Merrifield 129,000

GSA - Patent and Trademark Office Renewal 2051 Jamieson Avenue Old Town 54,000

Distil Networks, Inc. New Lease 4501 N. Fairfax Drive RCB Corridor 31,000

Your Recruiting Co. New Lease 3975 Fair Ridge Drive Fairfax Center 27,000

SRI New Lease 1875 Explorer Street Reston 26,000

TD Bank New Lease 1919 Gallows Road Tysons Corner 22,000

SOURCE: CoStar, County Newsletters, Washington Business Journal, Washington Post, Transwestern

Copyright © 2016 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.


Northern Virginia Office Market Indicators

SUBMARKET INVENTORYUNDER

CONSTRUCTIONQ4 NET

ABSORPTION2015 NET

ABSORPTIONDIRECT

VACANCYSUBLEASE

SPACETOTAL


RCB Corridor 23,984,926 719,548 72,000 (288,000) 20.7% 0.9% 21.6% $40.57

Crystal/Pentagon City 14,337,888 0 14,000 459,000 16.7% 0.3% 17.0% $36.61

Old Town 8,389,063 0 17,000 0 10.2% 0.9% 11.1% $32.19

Eisenhower Ave Corridor 9,202,185 700,000 37,000 (4,000) 21.6% 2.0% 23.6% $32.78

Springfield/Huntington/I-95 8,030,384 0 16,000 80,000 18.8% 1.6% 20.4% $28.53

Bailey's/Falls Church/Annandale 7,382,823 0 (15,000) (185,000) 26.0% 0.6% 26.6% $28.56

Merrifield 9,247,243 0 92,000 46,000 11.6% 1.1% 12.7% $31.54

Reston 18,797,053 0 94,000 226,000 11.5% 0.9% 12.4% $27.59

Herndon 12,253,982 0 (159,000) (319,000) 13.2% 1.6% 14.8% $27.08

Tysons Corner 28,814,092 1,791,913 125,000 67,000 15.0% 1.0% 16.0% $32.58

McLean/Vienna 2,370,748 0 12,000 33,000 12.7% 0.0% 12.7% $31.73

Oakton/Fairfax City 5,840,759 0 58,000 53,000 14.2% 0.4% 14.6% $23.74

Fairfax Center 7,248,110 0 (36,000) (65,000) 15.3% 0.9% 16.2% $26.24

Rt. 28 South/Chantilly 13,857,593 160,000 55,000 105,000 17.0% 0.4% 17.4% $25.18

Loudoun County 15,843,417 264,500 28,000 159,000 16.3% 0.3% 16.6% $23.46

Prince William County 6,462,679 0 19,000 97,000 10.9% 0.3% 11.2% $22.41

Total 192,062,945 3,635,961 429,000 464,000 16.0% 0.9% 16.8% $31.02


METHODOLOGY

The information in this report is the result of a compilation of information on office properties located in the Northern Virginia area. This report includes single-tenant, multi-tenant and owner-user office properties 15,000 SF and larger, excluding properties owned by a government agency.

T 703.821.0040 www.transwestern.com

7900 Tysons One Place, Suite 600McLean, Virginia 22102

CONTACT

Elizabeth NortonManaging Research Director | Mid-Atlantic [email protected]

Flex/industrial market steady during Q4Demand driven by mid-sized deals

The Northern Virginia flex/industrial was steady during the fourth quarter of 2015, as the direct vacancy rate declined 20 basis points to 7.5% and net absorption was positive 191,000 SF. Net absorption totaled 1.2 million SF during 2015, just above the 10-year average of 1.1 million SF. Landlords increased asking rents by 0.6% during the fourth quarter of 2015 and 2.0% for all of 2015, as the vacancy rate is low enough to warrant this rise. The pipeline expanded during 2015 and is well pre-leased, which will further boost net absorption as these projects deliver.

ECONOMY

Growth in professional/business services fueled by the tech sector Payroll employment increased 31,900 during the 12 months ending October 2015 in Northern Virginia, which is above the 20-year annual average of 24,900. The professional/business services sector grew 9,300 of these jobs during the past 12 months, with the computer systems design sub-sector accounting for 53% of these jobs. After job cuts during 2013 and 2014, the professional/business services sector is gaining steam, particularly in the tech sector. The leisure/hospitality sector followed with 8,000 new jobs, with the food services sub-sector accounting for 81% of these jobs.

The Northern Virginia unemployment rate is the lowest in the Washington metro area at 3.4% at October 2015, down from 3.9% one year ago. The unemployment rate is below the 10-year average of 3.9%. This compares to the Washington metro area unemployment rate of 4.3% and the national rate of 5.0% at October.

We expect conditions to pick up during 2016 and 2017, as consumer and business confidence strengthens to fuel the Northern Virginia economy. Through 2019, we expect job growth to average 21,000, with the strongest job growth occurring during 2016 and 2017. We expect the health, technology, construction, and food services industries to fuel job growth in the period ahead.

FLEX/INDUSTRIAL TRENDS

10-YEAR TREND FOURTH QUARTER 2015

OVER ALL VACANCY

7.5%Vacancy rate declines

ABSORPTION

1.2 Million SFStrong demand YTD

RENTAL R ATES

$9.06 PSFAsking rents up 2.0% YTD

UNDER CONSTRUCTION

1.5 Million SFConstruction pipeline expands

JOB GROW TH

31,900 JobsDuring 12-months ending October 2015

REAL ESTATE OUTLOOK

NORTHERN VIRGINIA FLEX/INDUSTRIAL MARKETFOURTH QUARTER 2015

8 REAL ESTATE OUTLOOK NORTHERN VIRGINIA FLEX/INDUSTRIAL MARKET Q4 2015


NORTHERN VIRGINIA FLEX/INDUSTRIAL NET ABSORPTION AND VACANCY

NORTHERN VIRGINIA FLEX/INDUSTRIAL ASKING RENTAL RATES

NORTHERN VIRGINIA FLEX/INDUSTRIAL DEVELOPMENT PIPELINE IN MILLIONS

NET ABSORPTION IN MILLIONS DIRECT VACANCY RATE

4%

5%

6%

7%

8%

9%

10%

11%

12%

13%

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

06 07 08 09 10 11 12 13 14 15*

BULK WAREHOUSE FLEX/WAREHOUSE FLEX/R&D

$6

$7

$8

$9

$10

$11

$12

$13

$14

$15

06 07 08 09 10 11 12 13 14 15*

COMPLETED UNDER CONSTRUCTION PRE-LEASED UNDER CONSTRUCTION AVAILABLE

0.0

0.5

1.0

1.5

2.0

2.5

3.0

06 07 08 09 10 11 12 13 14 15 16*



*Completed YTDSOURCE: CoStar, Transwestern

FLEX /INDUSTRIAL VACANCY AND DEMAND

Another strong year The Northern Virginia direct vacancy rate edged down to 7.5% at year-end 2015, from 7.7% three months prior. The vacancy rate has been declining steadily since 2009. The vacancy rate is well below the 10-year average of 9.3%. Bulk Warehouse has the lowest direct vacancy rate among the three product types at 5.9% at December 2015.

Net absorption totaled positive 191,000 SF during the fourth quarter of 2015, which is below the 10-year average quarterly absorption of positive 321,000 SF. Of the three property types, flex/warehouse contributed the strongest positive net absorption with positive 123,000 SF during the past three months. During 2015, net absorption totaled 1.2 million SF, just above the 10-year average of 1.1 million SF.

We expect asking rents to rise 2.5% to 3.0% during 2016, as the vacancy rate is low enough to justify rent increases.

The I-95 Corridor was the leader in net absorption during the past three months, totaling 155,000 SF. The Dulles Corridor contributed the second strongest quarter in the last three months, contributing positive 34,000 SF of net absorption with Mike’s Flooring Companies taking 41,200 SF at 14340-14370 Sullyfield Circle. Prince William County suffered the weakest quarter with negative 19,000 SF in net absorption due in large part to the move-out of several mid-size tenants, such as Curry’s Auto Service vacating space at 5611 Wellington Road.

FLEX /INDUSTRIAL SUPPLY AND DEVELOPMENT

Pipeline expands with a high pre-lease rate There were no deliveries in the Northern Virginia flex/industrial market during the fourth quarter of 2015. A total of 650,000 SF delivered at 76% pre-leased during all of 2015. The majority of product came on-line in the Dulles Corridor.

Projects under construction or renovation total 1.5 million SF at 70% pre-leased at December 2015. The Dulles Corridor amounts for 80% of the total pipeline while the other 20% is in Prince William County. Notably,

REAL ESTATE OUTLOOK NORTHERN VIRGINIA FLEX/INDUSTRIAL MARKET Q4 2015 9

Northwestern Mutual Life Insurance Company has four bulk warehouse buildings under construction at Northwoods in the Dulles Corridor, totaling 410,000 SF at 38% pre-leased. COPT has two flex/warehouse buildings at 7086 Wellington Road totaling 142,500 and 150,000 SF respectively in Prince William County. These projects are 100% leased.

FLEX /INDUSTRIAL PROJECTED SUPPLY VS. DEMAND

Overall vacancy rate to decline We project the overall vacancy rate will decline in Northern Virginia from 7.7% today to the mid-6% range by December 2016. We anticipate demand will outpace new supply during this period. The decline during the next year will be driven in part by the demand for retail distribution and housing construction supply.

FLEX /INDUSTRIAL RENTAL R ATES

Rents increase 2.0% during 2015 Flex/industrial asking rents increased 0.6% during the fourth quarter of 2015 and 2.0% during all of 2015. Flex/R&D and flex/warehouse rents increased by 1.0% and 0.7%, respectively during the past three months. Bulk warehouse rents edged down 0.1% during this period. We expect asking rents to rise 2.5% to 3.0% during 2016, as the vacancy rate is low enough to justify rent increases.

FLEX /INDUSTRIAL INVESTMENT MARKET

Investment volume more than doubles the 2014 levelNorthern Virginia investment activity was robust in 2015, as $408 million or $114 PSF closed. The I-95 Corridor accounted for 61% of the total sales volume. In addition, investors focused capital on flex/warehouse assets, representing 60% of the total investment sales volume. During all of 2014, volume totaled $156 million or $152 PSF. The most notable deal during the fourth quarter was MRP Realty and JP Morgan Asset Management purchasing the Northern Virginia Industrial Park in the I-95 Corridor for $86.5 million, or $106 PSF.

We expect the investment market to pick up pace during 2016, as investors take advantage of healthy market conditions and rising demand.

FLEX /INDUSTRIAL MARKET OUTLOOK

Market fundamentals to remain strong We expect the Northern Virginia flex/industrial market to remain strong during 2016, as demand rises to push the vacancy rate down to the mid-6% range by year-end 2016. As demand rises, we expect asking rents to rise 2.5% to 3.0% during 2016 as the vacancy rate is low enough to justify rent increases. The pipeline expanded during 2015 and holds a healthy pre-lease rate which will boost net absorption when the product delivers during 2016. We expect the pipeline to remain at current levels as tenants are in the market for upgraded space with a focus on efficient building design and site layout, which includes better trailer loading, clear heights, column spacing, and parking. n

10 REAL ESTATE OUTLOOK NORTHERN VIRGINIA FLEX/INDUSTRIAL MARKET Q4 2015

Northern Virginia Flex/Industrial Market Indicators

PROPERTY TYPE INVENTORYUNDER

CONSTRUCTIONQ4 NET

ABSORPTION2015 NET

ABSORPTIONDIRECT

VACANCYSUBLEASE

SPACEOVERALL


Bulk Warehouse 20,968,568 410,400 101,000 421,000 5.9% 0.1% 6.0% $7.34

Flex/Warehouse 59,399,550 1,054,597 123,000 839,000 7.7% 0.3% 7.9% $9.30

Flex/R&D 4,684,206 0 (35,000) (39,000) 11.8% 0.4% 12.2% $13.68

Total 85,052,324 1,464,997 191,000 1,222,000 7.5% 0.3% 7.7% $9.06


Northern Virginia Flex/Industrial Market Notable Lease Transactions

TENANT DEAL TYPE ADDRESS SUBMARKET SQUARE FEET

Arlington Iron Works Renewal 9127-A Euclid Avenue Prince William County 57,000

Iron Bow Technologies New Lease 3635 Concorde Parkway Dulles Corridor 14,000

Iomaxis, Inc. New Lease 1050 Furnance Road I-95 Corridor 13,000

ABM Building Services New Lease 5701 General Washington Drive I-95 Corridor 12,000

Heritage Contracting Renewal 14801 Willard Road Dulles Corridor 12,000

Double Eagle Vending Renewal 9115 Digital Drive Prince William County 8,000

Safelite Autoglass New Lease 2800 Dorr Avenue Beltway (I-495) 7,000

SOURCE: CoStar, County Newsletters, Washington Business Journal, Washington Post, Transwestern

Northern Virginia Flex/Industrial Market Construction Activity

SUBMARKET SQUARE FEET UNDER CONSTRUCTION/RENOVATION PERCENT PRE-LEASED

Dulles Corridor 1,172,497 62%

Prince William County 292,500 100%

Total 1,464,997 70%



Northern Virginia Flex/Industrial Market Indicators

SUBMARKET INVENTORYUNDER

CONSTRUCTIONQ4 NET

ABSORPTION2015 NET

ABSORPTIONDIRECT

VACANCYSUBLEASE

SPACETOTAL


Bulk Warehouse 304,912 0 11,000 29,000 1.7% 0.0% 1.7% N/A

Flex/Warehouse 3,180,356 0 11,000 32,000 3.8% 0.1% 3.9% $13.52

Flex/R&D 366,459 0 1,000 12,000 10.1% 0.0% 10.1% $14.18

Beltway (I-495) 3,851,727 0 23,000 73,000 4.2% 0.1% 4.3% $13.59

Bulk Warehouse 5,384,800 0 75,000 118,000 10.7% 0.0% 10.7% $7.57

Flex/Warehouse 19,240,932 0 83,000 211,000 7.6% 0.5% 8.1% $8.93

Flex/R&D 1,210,412 0 (4,000) 6,000 15.4% 0.0% 15.4% $15.72

I-95 Corridor 25,836,144 0 155,000 336,000 8.6% 0.4% 9.0% $8.97

Bulk Warehouse 70,982 0 0 0 0.0% 0.0% 0.0% N/A

Flex/Warehouse 1,575,134 0 27,000 99,000 8.8% 0.0% 8.8% $12.91

Flex/R&D 592,480 0 (30,000) (70,000) 16.7% 0.0% 16.7% $13.20

Reston/Herndon 2,238,596 0 (2,000) 29,000 10.6% 0.0% 10.6% $12.99

Bulk Warehouse 10,372,170 410,400 10,000 96,000 4.4% 0.0% 4.4% $7.52

Flex/Warehouse 21,844,059 762,097 26,000 517,000 9.9% 0.2% 10.1% $10.23

Flex/R&D 2,181,789 0 (2,000) 9,000 9.2% 0.9% 10.1% $13.16

Dulles Corridor 34,398,018 1,172,497 34,000 622,000 8.2% 0.2% 8.4% $9.60

Bulk Warehouse 4,835,704 0 5,000 178,000 4.0% 0.6% 4.6% $6.69

Flex/Warehouse 13,559,069 292,500 (24,000) (20,000) 5.0% 0.1% 5.0% $6.89

Flex/R&D 333,066 0 0 4,000 9.0% 0.0% 9.0% $10.04

Prince William County 18,727,839 292,500 (19,000) 162,000 4.8% 0.2% 5.0% $6.90

Bulk Warehouse 20,968,568 410,400 101,000 421,000 5.9% 0.1% 6.0% $7.34

Flex/Warehouse 59,399,550 1,054,597 123,000 839,000 7.7% 0.3% 7.9% $9.30

Flex/R&D 4,684,206 0 (35,000) (39,000) 11.8% 0.4% 12.2% $13.68

Northern Virginia Total 85,052,324 1,464,997 191,000 1,222,000 7.5% 0.3% 7.7% $9.06


Copyright © 2016 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.

METHODOLOGY

The information in this report is the result of a compilation of information on office properties located in the Northern Virginia area. This report includes single-tenant, multi-tenant and owner-user office properties 15,000 SF and larger, excluding properties owned by a government agency.

CONTACT

Elizabeth NortonManaging Research Director | Mid-Atlantic [email protected]

T 703.821.0040 www.transwestern.com

7900 Tysons One Place, Suite 600McLean, Virginia 22102


real estate outlook northern virginia office market...2 real estate outlook northern virginia office...

Documents