The Northern Virginia office market, which consists of 175 million square feet of inventory in Arlington, Alexandria, Fairfax, and Loudoun counties, exhibited signs of recovery during the second quarter 2010 as it improved in virtually all leasing categories from previous quarters. As the national economy continues to rebound from the most recent recession, the Washington, D.C. region remains one of the strongest performing office markets in the country. The national unemployment rate had dropped to 9.5% by the end of June, and there had been over 593,000 private-sector jobs added in 2010. When comparing this number to the Arlington (4.3%), Alexandria (4.8%), Fairfax (5%), and Loudoun (4.9%) counties’ unemployment rates, one may foresee that a long-term recovery is in the making.
Improvements in net absorption, vacancy, and asking rates defined the Northern Virginia office market’s performance in the second quarter 2010. As had been the case the past two quarters, sublease space that had hit the market in early 2009 continued to become absorbed in Fairfax, Arlington, and Alexandria counties. The overall asking rental rate increased from $29.88 in the first quarter 2010 to $30.23 in the second quarter 2010. The Government Services Administration (GSA), which accounted for 31% of all Northern Virginia leasing activity in 2009, continues to maintain a strong presence in the market. The top GSA transaction was a 83,000 square foot relet lease signed by The United States Agency for International Development (USAID) at Two Potomac Yard located at 2733 Potomac Yard in the Crystal City submarket. Other significant transactions included Deltek’s lease signed at 2291 Wood Oak Drive in the Herndon submarket for 113,787 square feet, Science Applications International Corporation’s (SAIC) 110,500 square foot lease at Metro Park VIII – 6909 Metro Park in the Springfield submarket, K-12, Inc.’s 98,000 square foot lease extension at South Pointe II - 2300 Corporate Park Drive in Herndon, and Deloitte’s 96,000 square foot expansion at Waterview - 1919 N Lynn Street in the Rosslyn submarket. Although there were only two lease transactions executed in excess of 100,000 square feet during the second quarter 2010, the volume of leases signed over 50,000 square feet greatly surpassed that of previous quarters. Increased sales and leasing activity should result in improved market fundamentals; however the effects of this recovery will most likely not be realized until 2011.