Extensive Deliveries Cut into Construction Levels
- Capital One delivered their new headquarters building in Tysons, adding 975,000 square feet to the inventory.
- Recent move-outs in the Reston market open up opportunities near the Town Center.
- Net new demand for the quarter totaled 781,497, led by Capital One's headquarters delivery.
Leasing in the Northern Virginia office market was led by the Drug Enforcement Administration (DEA), which executed a renewal at 600-700 Army Navy Drive. The government agency signed a 15-year lease for 511,487 square feet at their Pentagon City location. Airline Pilots Association chose Valo Park, 7950 Jones Branch Drive in Tysons Corner, for their headquarters relocation. The association will occupy 103,711 square feet when they move from their Herndon location. Net absorption for the third quarter totaled 781,497 square feet. New supply outpaced net absorption for the quarter, resulting in the overall vacancy rate increasing from 17.2 to 17.4 percent.
During the quarter, 1.46 million square feet of office product delivered. Capital One's new headquarters building at their Tysons Corner campus added 975,000 square feet of space to the market and represented net new demand in Northern Virginia. The 480,000-square-foot building at 3433 Historic Sully Way in the Route 28 Corridor South submarket, delivered leased entirely to a US Government agency. ComStock also commenced the construction of the second office building in their Reston Station project. The 215,210-square-foot building at 1906 Reston Metro Plaza commenced even with large blocks of vacancy in the first phase of the project and softening in both Plaza America and Reston Town Center.
Construction numbers in Northern Virginia dropped below two million square feet for the first time since 2010. Given demand for new product, it is expected that developers will break ground on a number of projects in the upcoming year. The market is seeing a bifurcation in Class A space where renovated buildings and newer construction with ample building and neighborhood amenities are drawing the attention of tenants. These buildings are commanding higher rental rates than the rest of the Class A market.