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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 first
NORTHERN 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 for
Economic 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 million
DC 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 3.3
DC 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 the
U.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 MIL
Net 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 for
Vacancy Rate
                                                                            high-quality spaces in the region.

17%
                              Historical Average
                                                                            Forecast
15%
13%                                                                         •	      The uncertainty surrounding the possibility of sequestration and federal procurement as
11%                                                                                 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
Cassidy Turley Office Market Snapshot
Northern 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- preliminary

Key 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 is
About Cassidy Turley                                                                                                                                          gathered from multiple sources considered to be
                                                                                                                                                              reliable. The information may contain errors or
Cassidy 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 warranty
company 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 and
supports 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 a
partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com for
more information about Cassidy Turley.                                                                                                                                             www.cassidyturley.com

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Northern Virginia 3Q12 Office Snapshot

  • 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 first NORTHERN 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 for Economic 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 million DC 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 3.3 DC 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 the U.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 MIL Net 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 for Vacancy Rate high-quality spaces in the region. 17% Historical Average Forecast 15% 13% • The uncertainty surrounding the possibility of sequestration and federal procurement as 11% 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 Snapshot Northern 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- preliminary Key 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 is About Cassidy Turley gathered from multiple sources considered to be reliable. The information may contain errors or Cassidy 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 warranty company 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 and supports 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 a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com for more information about Cassidy Turley. www.cassidyturley.com