Northern Virginia Office Report Q1 2019

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Market News

  • PBS signed the largest lease of the quarter for 120,328 square feet. They will remain in Crystal City, relocating to 1225 S. Clark Street in 2020. General Dynamics Information Technology (GDIT) executed the largest renewal of the quarter, taking 109,600 square feet at 7770 Backlick Road in Springfield.
  • Blackboard plans on moving its corporate headquarters from DC to Reston. They will occupy 45,644 square feet at 11720 Plaza America Drive in Reston later this year.

Demand & Supply

  • Demand for office space grew by 780,394 square feet during the first quarter of the year. It marked the sixth consecutive quarter of positive net absorption in the market and the tenth quarter in the last 12. This is slightly lower than last quarter’s 836,204 square feet of demand but is above the trailing four-quarter average of 645,160 square feet. 
  • Demand for space in all three classes increased last quarter, a departure from the recent trend in “flight to A space.” Absorption for Class A space was 351,093 square feet while Class B and C were 320,484 and 108,817, respectively.
  • Meridian delivered the Boro Tower in Tysons Corner. The 473,313-square-foot Trophy building includes tenants KPMG, Tegna, and Hogan Lovells. Boro Loft, a smaller building adjacent to Boro Tower, is expected to deliver later this year.
  • The largest groundbreaking of the quarter was Reston Gateway, which will be occupied by Fannie Mae upon delivery in 2022. They will vacate their entire campus from American Dream Way in Reston.

Vacancy & Rental Rates

  • As a result of the increase in demand, the vacancy rate fell from 17.1 percent to 16.9 percent during the quarter. The vacancy rate stood at 17.6 percent a year ago.
  • The Class A vacancy rate remained flat during the quarter at 17.6 percent due to the delivery of the Boro Tower. Both Class B and C vacancy rates fell from 18.6 percent to 18.2 percent and 11.5 percent to 11.1 percent, respectively.
  • During the quarter, the direct average asking rental rate decreased $0.15 (0.5%) to $32.58 per square foot. However, the rate increased by $0.13 (0.4%) from the same time last year.
  • A drop in the combined Class B & C rental rate was responsible for the overall decrease. During the quarter, the combined rate for lower quality product decreased 1.6 percent to $29.17. The Class A direct average asking rate remained flat at $36.41 per square foot over the quarter.

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Northern Virginia Office Report Q1 2019

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