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NORTHERN VIRGINIA

1Q11

Overview

Through March, the nation’s unemployment rate stood at 8.8%, the lowest average since April 2009. Hiring momentum in the health care industry continued to trend up, as more than 280,000 jobs were added over the past twelve months. Manufacturing employment, specifically in durable goods, has risen by 243,000 since December 2009. However, local government continued to report job losses and has shed over 416,000 jobs since September 2008.

In Northern Virginia, preliminary unemployment figures for the month of February are well under the national rate: Fairfax County at 4.6%, the City of Alexandria at 4.7%, Loudoun County at 4.4% and Prince William County at 5.6%. Arlington County is on track to deliver the lowest rate of 3.9%, compared to 4.8% at the same time last year.

Conditions Bottom Out

Market fundamentals in Northern Virginia changed little from the close of 2010. Direct and overall vacancy rates budged from 14.4% and 15.1% to 14.6% and 15.3%, respectively, as demand remained diminished and most tenants are seeking ways to prioritize space efficiency over growth initiatives.

The average asking rental rate for direct product finished 2010 at $9.91 per square foot (psf), and held steady through early 2011 at $9.91 psf. Rents are not expected to fluctuate measurably through the duration of the year; however, 2012 should show signs of improvement and thus give landlords the ability to start getting more aggressive while establishing rental rates at their properties.

Stagnant Leasing & Sales

Approximately 320,000 square feet (sf) of new leases were signed in the first quarter, and no properties traded hands to investors or users. Nearly half of new leasing activity took place in Fairfax County, with Springfield/I-95 leading the way and Route 28 South/Chantilly following behind.

Construction is still halted, and only one project is slated to deliver this year: approximately 125,000 sf will be officially completed in the second quarter at 10231 Harry J. Parrish Boulevard in Manassas, which has yet to secure a tenant and has a triple net asking rent of $7.50 per square foot. No other projects are currently on the radar to break ground in the near future.

Outlook

The remainder of the year will look much like 2010 as it relates to vacancy rates and asking rents. Notable game-changers in the Northern Virginia commercial market, such as BRAC, HOT Lanes and the Metro extension, are progressing but have yet to come to fruition. The first phase of Metro construction is expected to wrap up by late 2013, and HOT Lanes are on track to be completed in 2012. BRAC relocations will continue, leaving behind pockets of vacant space in some cases. One positive point is that the federal government recently avoided a complete shutdown, which would have had drastic effects on many businesses in the area.

Expect tenants to negotiate favorable deal terms over the next few quarters with little resistance from landlords. Nearly 7.0 million square feet (msf) of vacant space is available for lease out of an inventory of about 44.8 msf, and few tenants are in the market actively looking for large blocks of space.

Stats on the Go

1Q10 1Q11 Y-o-Y 12 month Change Forecast Overall 15.2% 15.3% 0.1 pp  Vacancy Direct
1Q10
1Q11
Y-o-Y
12 month
Change
Forecast
Overall
15.2%
15.3%
0.1 pp

Vacancy
Direct Asking
$10.21
$9.90
-3.0%

Rents
YTD Leasing
323,897
319,944
-1.2%

Activity (sf)

Construction Completions

2.0

1.5

1.0

0.5

0.0

Activity (sf) Construction Completions 2.0 1.5 1.0 0.5 0.0 2007 2008 2009 2010 1Q11 Overall Rental
Activity (sf) Construction Completions 2.0 1.5 1.0 0.5 0.0 2007 2008 2009 2010 1Q11 Overall Rental
Activity (sf) Construction Completions 2.0 1.5 1.0 0.5 0.0 2007 2008 2009 2010 1Q11 Overall Rental
Activity (sf) Construction Completions 2.0 1.5 1.0 0.5 0.0 2007 2008 2009 2010 1Q11 Overall Rental
Activity (sf) Construction Completions 2.0 1.5 1.0 0.5 0.0 2007 2008 2009 2010 1Q11 Overall Rental
Activity (sf) Construction Completions 2.0 1.5 1.0 0.5 0.0 2007 2008 2009 2010 1Q11 Overall Rental
Activity (sf) Construction Completions 2.0 1.5 1.0 0.5 0.0 2007 2008 2009 2010 1Q11 Overall Rental
Activity (sf) Construction Completions 2.0 1.5 1.0 0.5 0.0 2007 2008 2009 2010 1Q11 Overall Rental
Activity (sf) Construction Completions 2.0 1.5 1.0 0.5 0.0 2007 2008 2009 2010 1Q11 Overall Rental
Activity (sf) Construction Completions 2.0 1.5 1.0 0.5 0.0 2007 2008 2009 2010 1Q11 Overall Rental
Activity (sf) Construction Completions 2.0 1.5 1.0 0.5 0.0 2007 2008 2009 2010 1Q11 Overall Rental
Activity (sf) Construction Completions 2.0 1.5 1.0 0.5 0.0 2007 2008 2009 2010 1Q11 Overall Rental

2007

2008

2009

2010

1Q11

Overall Rental vs. Vacancy Rates

$12.00

$10.00

$8.00

$6.00

$4.00

$2.00

$0.00

Rental Rate

$12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Rental Rate Vacancy Rate 2007 2008 2009 2010 1Q11

Vacancy Rate

$10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Rental Rate Vacancy Rate 2007 2008 2009 2010 1Q11 18%
$10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Rental Rate Vacancy Rate 2007 2008 2009 2010 1Q11 18%
$10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Rental Rate Vacancy Rate 2007 2008 2009 2010 1Q11 18%
$10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Rental Rate Vacancy Rate 2007 2008 2009 2010 1Q11 18%

2007

2008

2009

2010

1Q11

18%

16%

14%

12%

10%

8%

6%

4%

2%

0%

Market/Submarket Statistics

NORTHERN VIRGINIA INDUSTRIAL REPORT

1Q11

 

O verall

YTD

YTD

YTD

YTD

YTD

Direct Weighted Average Net

Submarket

Inventory

Vacancy

Leasing

User Sales

Under

Construction

Construction

Direct Net

O verall Net

Rental Rate*

 
 

Rate

Activity

Activity

Completions

Absorption

Absorption

HT

MF

O S

W/D

Springfield/I-95

6,143,036

15.8%

54,000

0

0

0

(47,080)

(47,080)

N/A

N/A

$13.58

N/A

Route 28 South

5,743,403

17.1%

25,000

0

0

0

10,670

32,421

N/A

N/A

$11.85

N/A

Route 28 North

6,329,804

17.7%

32,402

0

0

0

62,545

65,045

N/A

N/A

$9.57

N/A

Manassas

861,186

34.3%

0

0

0

0

(7,919)

(7,919)

N/A

N/A

$11.41

N/A

Fle x

19,077,429

17.6%

111,402

0

0

0

18,216

42,467

N/A

N/A

$11.64

N/A

Springfield/I-95

11,770,052

12.0%

55,739

0

0

0

(11,849)

14,947

N/A

N/A

N/A

$8.74

Route 28 South

3,766,977

14.3%

15,788

0

0

0

151,240

151,240

N/A

N/A

N/A

$7.67

Route 28 North

8,027,528

16.3%

137,015

0

0

0

(168,038)

(346,811)

N/A

N/A

N/A

$8.21

Manassas

2,112,948

11.5%

0

0

124,800

0

2,747

2,747

N/A

N/A

N/A

$7.69

Warehouse/Distribution

25,677,505

13.6%

208,542

0

124,800

0

(25,900)

(177,877)

N/A

N/A

N/A

$8.31

 

OS/WD

Springfield/I-95

17,913,088

13.3%

109,739

0

0

0

(58,929)

(32,133)

N/A

N/A

N/A

$10.75

Route 28 South

9,510,380

16.0%

40,788

0

0

0

161,910

183,661

N/A

N/A

N/A

$10.21

Route 28 North

14,357,332

16.9%

169,417

0

0

0

(105,493)

(281,766)

N/A

N/A

N/A

$8.82

Manassas

2,974,134

18.1%

0

0

124,800

0

(5,172)

(5,172)

N/A

N/A

N/A

$9.60

Total

44,754,934

15.3%

319,944**

0

124,800

0

(7,684)

(135,410)

N/A

N/A

N/A

$9.90

* Rental rates reflect asking $psf/year.

**Revised after the close of statistics.

HT= High Tech MF=Manufacturing OS = Office Service

W/D = Warehouse/Distribution

Market Highlights

 
Market Highlights  

SIGNIFICANT 1Q11 LEASE TRANSACTIONS

 

BUILDING

MARKET

TENANT

SQUARE FEET

PROPERTY TYPE

22630

Dulles Summit Court

Route 28 Corridor North

Amazon

137,015

Warehouse/Distribution

10400

Furnace Road

Springfield/I-95

Undisclosed

54,000

Flex

22695

Commerce Center Court

Route 28 Corridor North

Turner Associates

32,402

Flex

6636-6672 Fleet Drive

Springfield/I-95

Worldpac, Inc.

30,000

Warehouse/Distribution

SIGNIFICANT 1Q11 SALE TRANSACTIONS

 

BUILDING

MARKET

BUYER

SQUARE FEET

PURCHASE PRICE

N/A

SIGNIFICANT 1Q11 CONSTRUCTION COMPLETIONS

 

BUILDING

MARKET

MAJOR TENANT

SQUARE FEET

COMPLETION DATE

N/A

SIGNIFICANT PROJECTS UNDER CONSTRUCTION/RENOVATION

 

BUILDING

MARKET

MAJOR TENANT

SQUARE FEET

COMPLETION DATE

10231

Harry J. Parrish Boulevard

Manassas

N/A

124,800

2Q11

10231 Harry J. Parrish Boulevard Manassas N/A 124,800 2Q11