2019-07-02_DTZ戴德梁行_Office_Q3_2018_Northern_Virginia_2页_555kb

Northern Virginia Office Market Summary

Core Content

The Northern Virginia (NoVA) office market experienced continued growth in the third quarter of 2018, driven by strong job creation and absorption activity. The region remains a key hub for economic activity in the D.C. metro area, with employment increasing by 26,000 since August 2017 and job growth concentrated in professional business services and retail. Despite a stable unemployment rate in the D.C. metro, the U.S. unemployment rate decreased slightly, reflecting broader national trends.

Market Indicators

• Rental rates reflect gross asking $psf/year

Market Overview

• Absorption Activity: The NoVA office market saw positive net move-ins of 156,439 square feet (sf) in Q3 2018, with a year-to-date (YTD) total of 804,567 sf.
• Vacancy Rates: Overall vacancy in NoVA dropped to 20.6% from 22.0% in Q3 2017, with direct vacancy decreasing by 150 basis points (bps) to 19.4%.
• Leasing Activity: Approximately 1.2 msf of new leases were signed in Q3 2018, with YTD leasing activity reaching 5.9 msf. The Air Line Pilots Association signed the largest new lease of the quarter for 103,711 sf in Tysons Corner.
• Tenant Activity: Small to mid-size tenants expanded their footprints, with 125,080 sf of expansions during the quarter. Government contractors and tech companies are increasing their space requirements.
• Renewals: The GSA renewed a 500,000-sf space for the Drug Enforcement Administration in Crystal City, marking the largest renewal of the quarter.

Key Developments

• New Construction: Capital One delivered a 975,000-sf tower in Tysons Corner, while Meridian's Boro Tower is expected to be 65% leased by Q1 2019. Comstock Partners broke ground on 1906 Reston Metro Plaza, a 180,000-sf tower in Reston.
• Sales Activity: Seven buildings in Reston/Herndon totaling 1.2 msf traded for $189.7 million, averaging $157 psf. Notable transactions included the sale of the Sunrise Valley Drive Campus for $212 psf and 460 Herndon Parkway for $218 psf.
• Rental Trends: Average asking rents increased to $32.79 psf, up 2.2% YOY, with Class A rents at $35.21 psf. Developers are expected to continue pushing rents upward as new construction delivers, although vacancy remains elevated.

Outlook

• Speculative Construction: NoVA may see increased speculative construction due to the dwindling supply of quality large blocks of Class A space.
• Market Trends: The "flight to quality" trend is expected to continue, with new construction outperforming existing properties. Developers are converting outdated office spaces into multi-family and mixed-use projects to manage vacancy rates.
• Submarket Performance: Submarkets like Tysons Corner and Reston/Herndon showed strong absorption and leasing activity, while others such as I-395 Corridor and Springfield had higher vacancy rates and mixed net absorption.

Key Lease Transactions Q3 2018

Key Sales Transactions Q3 2018

Contact Information

• Cushman & Wakefield
• Address: 1800 Tysons Boulevard, Tysons, VA 22102
• Website: cushmanwakefield.com
• Contact: Michelle Huneke, Associate Market Director
  • Tel: +1 703 847 2736
  • Email: michelle.huneke@cushwake.com

About Cushman & Wakefield

Cushman & Wakefield is a leading global real estate services firm with 48,000 employees across 400 offices and 70 countries. In 2017, the firm reported revenue of $6.9 billion, covering core services such as property management, leasing, and capital markets. The firm is committed to delivering exceptional value to real estate occupiers and owners.