2019-07-02_DTZ戴德梁行_Office_Q2_2019_Northern_Virginia_2页_473kb

Northern Virginia Office Market Q2 2019 Summary

Core Content

The Northern Virginia office market report for Q2 2019 provides an overview of economic indicators, market performance, key lease and sales transactions, and future outlook for the region. The data reflects a mix of positive and negative trends across different submarkets, with a focus on job growth, vacancy rates, net absorption, and asking rents.

Key Economic Indicators

• D.C. Metro Employment: Stabilized at 3.3 million in Q2 2019, down from the initial 54,000 new jobs in 2018 to 36,000 due to the government shutdown.
• D.C. Metro Unemployment: Decreased to 3.3% from 3.4% in Q2 2018, indicating a tight labor market.
• U.S. Unemployment: Continued to decline to 3.6% from 3.9% in Q2 2018.
• Vacancy Rate: Overall vacancy rate in Northern Virginia decreased slightly to 20.3% from 20.5% in Q2 2018.
• Net Absorption: Year-to-date (YTD) net absorption reached 591,208 sf, with Q2 2019 showing positive absorption of 236,485 sf.
• Leasing Activity: Q2 2019 saw 2,446,370 sf of new leases, above the historical average of 1.4 million sf.
• Under Construction: Increased to 2.8 million sf from 2.5 million sf in Q2 2018.
• Average Asking Rent: Rose to $33.48 psf from $32.69 psf in Q2 2018, with Class A rents increasing to $36.15 psf and Class B rents slightly decreasing to $30.29 psf.

Market Overview

• Rosslyn: Vacancy rate at 23.7%, with 140,168 sf of net absorption in Q2 2019.
• Courthouse/Clarendon/VA Square: Vacancy rate at 16.2%, but saw negative net absorption of -64,113 sf in Q2 2019.
• Ballston: Vacancy rate at 25.7%, with 319,656 sf of YTD leasing activity.
• Crystal City/Pentagon City: Vacancy rate at 18.8%, with 901,456 sf of YTD leasing activity and a rise in asking rents.
• Arlington County: Vacancy rate at 21.2%, with 1,470,357 sf of YTD leasing activity.
• Old Town: Vacancy rate at 9.1%, showing strong leasing activity.
• I-395 Corridor: Vacancy rate at 36.3%, with low net absorption in Q2 2019.
• Huntington/Eisenhower: Vacancy rate at 37.8%, with 292,248 sf of YTD leasing activity.
• City of Alexandria: Vacancy rate at 23.6%, with 2,92,248 sf of YTD leasing activity.
• Inside the Beltway: Vacancy rate at 22.0%, with 1,762,605 sf of YTD leasing activity.
• Annandale/Baileys: Vacancy rate at 20.6%, with modest net absorption.
• Merrifield/Route 50: Vacancy rate at 20.7%, with positive net absorption in Q2 2019.
• Fairfax/Oakton/Vienna: Vacancy rate at 25.3%, with minimal net absorption in Q2 2019.
• Tysons Corner: Vacancy rate at 19.6%, with strong leasing activity.
• Reston/Herndon: Vacancy rate at 17.7%, with negative net absorption in Q2 2019.
• Route 28 South/Chantilly: Vacancy rate at 12.6%, showing improvement.
• Springfield: Vacancy rate at 26.3%, with positive net absorption.
• Fairfax County: Vacancy rate at 19.2%, with 2,455,918 sf of YTD leasing activity.
• Loudoun County: Vacancy rate at 19.4%, with negative net absorption in Q2 2019.
• Outside the Beltway: Vacancy rate at 19.2%, with 2,618,501 sf of YTD leasing activity.
• Northern Virginia Totals: Overall vacancy rate at 20.3%, with 4,381,106 sf of YTD leasing activity and 2,798,843 sf under construction.

Key Lease Transactions

• 1770 Crystal Drive, 1800 Bell Street S, 241 18th Street S, 2345 Crystal Drive: Amazon signed a new lease for 585,285 sf in Crystal City/Pentagon City.
• 13820 Sunrise Valley Drive: A confidential cloud computing company signed a new lease for 268,240 sf in Reston/Herndon.
• 1550 Westbranch Drive: Freddie Mac signed a new lease for 151,949 sf in Tysons Corner.
• 13530 Dulles Technology Drive: Constellis signed a new lease for 106,737 sf in Reston/Herndon.

Key Sales Transactions

• 5001 Eisenhower Avenue: Sold for $43,000,000 ($70 psf) to StonebridgeCarras by Spaulding & Sly, Prudential RE Investors.
• Centerpointe I & II (4000/4050 Legato Road): Sold for $122,000,000 ($289 psf) to Manulife US REIT by Alony Hetz.
• Presidential Tower (2550 S Clark Street): Sold for $123,215,000 ($370 psf) to Starwood Capital by Beacon Capital Partners.

Outlook

• The "flight to quality" continues to influence occupier preferences, with technology and co-working firms expanding in the region.
• New construction is expected to outperform, while vacancy will likely be concentrated in commodity spaces.
• Rising rents and tightening markets in core submarkets like Tysons, Reston, and Herndon are starting to impact secondary markets such as Merrifield.

About Cushman & Wakefield

• Cushman & Wakefield is a leading global real estate services firm with 51,000 employees in 400 offices across 70 countries.
• The firm reported $8.2 billion in revenue in 2018, covering core services such as property, facilities, and project management, leasing, and capital markets.
• The report is provided by Cushman & Wakefield, with contact details for Michelle Huneke, Associate Market Director.

Conclusion

Northern Virginia's office market in Q2 2019 showed resilience despite challenges from the government shutdown and economic uncertainty. The market experienced a slight decrease in vacancy and continued positive net absorption, supported by strong leasing activity and rising asking rents. Key tenants and developers played a significant role in shaping the market dynamics, with notable lease and sales transactions highlighting the region's ongoing development and investment activity.