REAL ESTATE OUTLOOK NORTHERN VIRGINIA OFFICE MARKET Office market fundamentals mixed in Q1 Negative absorption accompanied by an increase in rents During the first three months of 2017, Northern Virginia office market fundamentals were mixed. The area negatively absorbed 57,000 SF; however, the direct vacancy rate declined 10 basis points versus the previous quarter. This was primarily due to the demolition of two properties totaling 348,700 SF. Additionally, asking rents grew by 70 basis points during the quarter to $30.88 PSF, with greater quarterly rent growth among Class A assets. The Northern Virginia pipeline held steady at 4.4 million SF and is well pre-leased at 67%. OFFICE TRENDS 10-YEAR TREND OVERALL 16.1% Vacancy declines with several demolitions ECONOMY Unemployment rate declines to 3.1% During the 12 months ending January 2017, Northern Virginia payroll employment grew by 27,600 jobs, more than two times the 10-year average of 13,000. The professional/business services sector accounted for nearly half of the new jobs created, generating 12,300 positions, or 45% of growth. The education/health services sector took second place, adding 6,300 new jobs during the same period. Federal government employers added 1,000 new jobs. This growth will likely halt, and possibly reverse, given Trump s freeze on federal hiring. The federal workforce could shrink by 1.8% in the Washington metro area if Trump s budget is approved. RENTAL RATES 57,000 SF Demand weak during first quarter $30.88 PSF Up 70 basis points since year-end 2016 Northern Virginia registers the lowest unemployment rate among Washington metro area substates, at 3.1% in December 2016. December s figure represents a 10 basis point decline versus December 2015 and compares favorably to the national rate of 4.5%. UNDER CONSTRUCTION 4.4 Million SF Construction pipeline is well leased With rising consumer confidence and recent record stock market performance, we expect business and employment growth to continue in 2017. Through 2021, we project average annual job growth of 13,200, representing 42% of new positions created throughout the metro area. We expect the health, technology, construction, and food services industries to fuel job growth in the period ahead. JOB GROWTH 27,600 Jobs During 12-months ending January 2017
NORTHERN VIRGINIA OFFICE MARKET UNEMPLOYMENT RATE UNITED STATES WASHINGTON METRO AREA NORTHERN VIRGINIA 12% 10% 8% 6% 4% 2% 0% 05 06 07 08 09 10 11 12 13 14 15 16 SOURCE: Bureau of Labor Statistics, Transwestern PAYROLL JOB GROWTH OFFICE AND DEMAND Absorption positive for Class B/C assets Northern Virginia s direct vacancy rate was 16.1% at March 2017, a 10 basis point decline from three months prior and a 20 basis point drop from the first quarter of 2016. This is primarily due to the demolition of buildings in the Eisenhower Avenue Corridor and Loudoun County. Notably, the current vacancy rate is well above the 10-year average of 14.2%. The Class A direct vacancy rate was 14.1% at March 2017, up 20 basis points from year-end 2016, and 30 basis points from one year prior. Conversely, the Class B/C direct vacancy rate declined by 30 basis points during the first quarter to 17.1%. The rate for the most recent quarter was a 50 basis point improvement over the year prior. 3% 2% 1% 0% -1% -2% -3% -4% -5% UNITED STATES WASHINGTON METRO AREA NORTHERN VIRGINIA *12 months ending January 2017 SOURCE: Bureau of Labor Statistics, Transwestern Northern Virginia negatively absorbed 57,000 SF during the first quarter, as robust leasing activity in submarkets such as the RCB Corridor and Rt. 28 South/ Chantilly was offset by large move-outs in Merrifield and the Eisenhower Avenue Corridor. Class B/C buildings drove net absorption during the three months ending March 2017, at positive 79,000 SF, while Class A properties negatively absorbed 137,000 SF. The most recent quarter differs from 2016, in which Class A absorption of 477,000 SF offset negative absorption of 455,000 SF among Class B/C assets. The most recent quarter is also less than the 10-year quarterly average of positive 146,000 SF. NORTHERN VIRGINIA OFFICE NET AND 3.0 2.0 1.0 0.0-1.0-2.0-3.0 NET IN MILLIONS DIRECT RATE 18% 16% 14% 12% 10% 8% 6% 4% The RCB Corridor was the submarket leader for absorption during the three months ending March 2017, primarily due to a 196,700 SF office lease signed by Nestle. Nestle is relocating its headquarters to 1812 N. Moore Street in Rosslyn, a building vacant since its completion in 2013. Nestle will occupy 40% of the 35-story tower, with an option to expand. An 80,000 SF expansion by Arlington Public Schools at 2110 Washington Boulevard also positively impacted net absorption in the submarket. Other notable lease transactions inked during the quarter include Serco signing for 83,300 SF at 12930 Worldgate Drive in Herndon and integrated security and infrastructure solutions provider SOC leasing the second floor with a 44,400 SF deal at 3975 Virginia Mallory Drive in the Rt. 28 South/Chantilly submarket. Strong absorption in select submarkets was offset by large move-outs in others. Noblis vacated nearly 256,800 SF at 3150 Fairview Park Drive, relocating its headquarters to 2002 Edmund Halley Drive in Reston. Elbit Systems, similarly, vacated 27,000 SF at 8200 Greensboro Drive in Tysons Corner to downsize into new space in Reston. Also along Greensboro Drive, Labat-Anderson and Metro Offices vacated 24,800 SF and 21,700 SF, respectively. The professional/business services accounted for 50% of leasing activity, for new or relet deals, during the first quarter. For the first three months of 2017, the RCB Corridor outstripped other submarkets for greatest leasing activity, accounting for 41% of the Northern Virginia total. Rt. 28 South/Chantilly was second, at 17%. 2 REAL ESTATE OUTLOOK NORTHERN VIRGINIA OFFICE MARKET Q1 2017
OFFICE RENTAL RATES Asking rents increase on both quarterly and annual basis Average asking rents grew by 70 basis points during the first quarter of 2017. At March 2017, rents for all classes stood at $30.88 PSF, a 150 basis point increase over the first quarter of 2016. For the most recent quarter, asking rents for Class A properties averaged $34.12 PSF, while Class B/C rents averaged $28.12 PSF. Concession packages remained elevated during the first quarter of 2017, similar to 2016. For a typical 10-year or greater term for a new lease, tenant improvement allowances averaged around $75 PSF with 12 months of free rent. NORTHERN VIRGINIA CONTIGUOUS BLOCK ANALYSIS NUMBER OF BUILDINGS - Q1 2016 NUMBER OF BUILDINGS - Q1 2017 700 600 500 400 244 626 300 234 520 200 353 148 385 137 100 62 158 162 61 0 72 30 68 27 10,000 SF 20,000 SF 50,000 SF 100,000 SF OFFICE SUPPLY AND DEVELOPMENT RCB Corridor competes with Tysons for largest pipeline There were no new office deliveries during the first three months of 2017. However, at March 2017, there is approximately 4.4 million SF of office space under construction in Northern Virginia. Approximately 67% of this development is pre-leased, well above the 10-year average pre-lease rate of 46%. Tysons Corner is home to the largest concentration of development at March 2017, with 1.6 million SF under construction, of which 69% is pre-leased. With nearly 895,000 SF under construction at 66% pre-leased, the RCB Corridor has the second largest pipeline. The National Science Foundation Building, at 700,000 SF, is responsible for the Eisenhower Avenue Corridor s third place position. In total, approximately 2 million SF of office space is slated to deliver throughout Northern Virginia during 2017. NORTHERN VIRGINIA OFFICE ASKING RENTAL RATES $40 $35 $30 $25 $20 $15 CLASS A CLASS B/C NORTHERN VIRGINIA OFFICE DEVELOPMENT PIPELINE MILLION SF OFFICE INVESTMENT MARKET Investment activity strong in Tysons Corner submarket Northern Virginia investment sales volume totaled $412.4 million, or $218 PSF, during the first quarter of 2017. Eight transactions took place during the first three months of the year. Notably, the Meridian Group purchased the four-building Tysons Metro Center from Beacon Capital Partners. The portfolio, which includes 8251, 8255, 8281, and 8285 Greensboro Drive, sold for $227 million, or $297 PSF. Another of the quarter s largest transactions took place in Tysons Corner, with Rockpoint Group buying 8300 Greensboro Drive and 1600 International Drive from American Realty Advisors for $90 million, or $240 PSF. 2.5 2.0 1.5 1.0 0.5 0.0 COMPLETED UNDER CONSTRUCTION PRE-LEASED UNDER CONSTRUCTION AVAILABLE 10 11 12 13 14 15 16 17* 18 19 REAL ESTATE OUTLOOK NORTHERN VIRGINIA OFFICE MARKET Q1 2017 3
NORTHERN VIRGINIA OFFICE MARKET Continuing a trend from 2016, investors focused more capital on Class B/C assets during the first quarter of 2017. These properties represented 85% of the quarterly transaction volume. Properties that were located in somewhat or very walkable neighborhoods accounted for 83% of sales during the first quarter, significantly more than the 34% captured in 2016. OFFICE MARKET OUTLOOK Gradual improvement in office market fundamentals will continue Strong regional employment growth will encourage demand for office space; however, this may be partially offset by tenant trends toward densification and consolidation, as well as new available inventory delivering to the market. As a result, we expect improvements in the Northern Virginia office market to be gradual. New inventory will command rents at the top of the market; however, elevated vacancy rates may exert some downward pressure on rents in less competitive markets. In certain submarkets, tenants may benefit from elevated concession packages. As a result, progress will likely be slower than in previous recovery cycles. We project the overall Northern Virginia vacancy rate (inclusive of sublease space) to remain relatively flat through year-end 2018, hovering around the high-16% to low-17% range. We expect asking rents will edge up 0.5% to 1.5% during 2017. The extension of Metrorail s Silver Line will continue to significantly impact a number of Northern Virginia office submarkets, encouraging demand and additional development. As employers increasingly seek transit-oriented, amenitized space, renovations converting older assets into Class A product will become more common. As a result, value-add investors looking for the greatest opportunities should direct resources towards Class B/C product in competitive locations. Given the recent strong investment sales in value-add properties, low, post-recession pricing on older assets may start to rise. Short-term challenges facing the Northern Virginia market include a relatively large development pipeline. The area, however, remains one of the strongest job markets in the United States. Many of the region s key industries, including defense, cybersecurity, and government contracting, may benefit significantly from new federal priorities, as Trump s proposed budget seeks a $54 billion hike in defense spending and an end to defense sequestration. However, to offset this increase Trump proposes slashing other budgets, such as the Environmental Protection Agency (EPA), which holds office space in the Crystal City submarket, upwards of 31%. The EPA would lose 3,200 positions under the proposed plan. In most office submarkets, recovery will be gradual, with transit-oriented locations, populated by long-term tenants and featuring small development pipelines, experiencing the most rapid improvements. 4 REAL ESTATE OUTLOOK NORTHERN VIRGINIA OFFICE MARKET Q1 2017
Northern Virginia Office Market Indicators PROPERTY CLASS INVENTORY UNDER CONSTRUCTION Q1 NET YTD NET DIRECT SUBLEASE SPACE OVERALL AVERAGE RATE PSF Class A 67,733,319 4,231,967 (137,000) (137,000) 14.1% 0.9% 15.0% $34.12 Class B/C 124,508,137 147,500 79,000 79,000 17.1% 0.6% 17.8% $28.12 Total 192,241,456 4,379,467 (57,000) (57,000) 16.1% 0.7% 16.8% $30.88 Northern Virginia Office Market Notable Lease Transactions TENANT DEAL TYPE ADDRESS SUBMARKET SQUARE FEET Nestle New Lease 1812 N. Moore Street RCB Corridor 196,700 General Services Administration (GSA) New Lease 14360 Newbrook Drive Rt. 28 South/Chantilly 96,000 Serco New Lease 12930 Worldgate Drive Herndon 83,300 Arlington Public Schools Expansion 2110 Washington Boulevard RCB Corridor 80,000 General Services Administration (GSA) Renewal 14360 Newbrook Drive Rt. 28 South/Chantilly 63,700 Regus New Lease 1101 Wilson Boulevard RCB Corridor 45,000 SOC New Lease 3975 Virginia Mallory Drive Rt. 28 South/Chantilly 44,400 SOURCE: CoStar, County Newsletters, Washington Business Journal, Washington Post, Transwestern Northern Virginia Office Market Construction Activity SUBMARKET SQUARE FEET UNDER CONSTRUCTION/RENOVATION PERCENT PRE-LEASED RCB Corridor 894,548 66% Crystal/Pentagon City 100,000 100% Eisenhower Ave Corridor 700,000 97% Reston 365,000 3% Tysons Corner 1,555,419 69% McLean/Vienna 235,000 100% Fairfax Center 150,000 79% Rt. 28 South/Chantilly 160,000 0% Loudoun County 107,000 59% Prince William County 112,500 55% Total 4,379,467 67% REAL ESTATE OUTLOOK NORTHERN VIRGINIA OFFICE MARKET Q1 2017 5
NORTHERN VIRGINIA OFFICE MARKET Northern Virginia Office Market Indicators SUBMARKET INVENTORY UNDER CONSTRUCTION Q1 NET YTD NET DIRECT SUBLEASE SPACE TOTAL AVERAGE RATE PSF RCB Corridor 23,984,926 894,548 408,000 408,000 17.3% 0.8% 18.1% $41.73 Crystal City/Pentagon City 14,098,585 100,000 (14,000) (14,000) 17.1% 0.3% 17.4% $35.74 Old Town 8,389,063 0 (17,000) (17,000) 11.6% 0.8% 12.4% $33.14 Eisenhower Ave Corridor 8,973,440 700,000 (130,000) (130,000) 23.2% 0.1% 23.3% $31.97 Springfield/Huntington/I-95 8,030,384 0 (40,000) (40,000) 19.5% 0.5% 20.0% $28.48 Bailey's/Falls Church/Annandale 7,382,823 0 (52,000) (52,000) 27.5% 0.6% 28.1% $28.48 Merrifield 9,247,243 0 (268,000) (268,000) 14.2% 0.9% 15.1% $31.09 Reston 18,797,053 365,000 56,000 56,000 9.2% 1.2% 10.4% $29.58 Herndon 12,253,982 0 (25,000) (25,000) 17.8% 1.9% 19.7% $27.42 Tysons Corner 29,335,138 1,555,419 (59,000) (59,000) 15.5% 0.3% 15.8% $33.19 McLean/Vienna 2,201,261 235,000 (4,000) (4,000) 7.0% 0.9% 7.9% $35.24 Oakton/Fairfax City 5,840,759 0 12,000 12,000 14.3% 0.4% 14.7% $24.02 Fairfax Center 7,248,110 150,000 (7,000) (7,000) 22.7% 1.2% 23.9% $25.16 Rt. 28 South/Chantilly 13,887,593 160,000 167,000 167,000 13.5% 0.5% 14.0% $25.14 Loudoun County 16,108,417 107,000 13,000 13,000 16.0% 0.8% 16.8% $23.33 Prince William County 6,462,679 112,500 (97,000) (97,000) 12.9% 0.6% 13.5% $23.01 Total 192,241,456 4,379,467 (57,000) (57,000) 16.1% 0.7% 16.8% $30.88 CONTACT Elizabeth Norton Managing Research Director Mid-Atlantic 202.775.7026 elizabeth.norton@transwestern.com Claire Whitesell Research Associate Mid-Atlantic 202.775.7049 claire.whitesell@transwestern.com METHODOLOGY The information in this report is the result of a compilation of information on office properties located in the Northern Virginia area. This report includes single-tenant, multi-tenant and owner-user office properties 15,000 SF and larger, excluding properties owned by a government agency. 7900 Tysons One Place, Suite 600 McLean, Virginia 22102 T 704.821.0040 www.transwestern.com Copyright 2017 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to First parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.
REAL ESTATE OUTLOOK NORTHERN VIRGINIA FLEX/INDUSTRIAL MARKET Flex/industrial market strengthens Vacancy rate continues downward trend, while rents edge up During the first three months of 2017, the Northern Virginia flex/industrial market experienced steady demand. Quarterly net absorption registered positive 175,000 SF, and the area s direct vacancy rate declined 50 basis points to 6.9%. The most recent quarter s rate is an 80 basis point improvement over the first quarter of 2016. Asking rents grew 0.1% during the quarter to $9.28, a 2.2% increase over rents during the first quarter a year prior. ECONOMY Unemployment rate declines to 3.1% During the 12 months ending January 2017, Northern Virginia payroll employment grew by 27,600 jobs, more than two times the 10-year average of 13,000. The professional/business services sector accounted for nearly half of the new jobs created, generating 12,300 positions, or 45% of growth. The education/health services sector took second place, adding 6,300 new jobs during the same period. Federal government employers added 1,000 new jobs. This growth will likely halt, and possibly reverse, during 2017 given Trump s freeze on federal hiring. The federal workforce could shrink by 1.8% in the Washington metro area if Trump s budget is approved. Northern Virginia registers the lowest unemployment rate among Washington metro area substates, at 3.1% in December 2016. December s figure represents a 10 basis point decline versus December 2015 and compares favorably to the national rate of 4.5%. With rising consumer confidence and recent record stock market performance, we expect business and employment growth to continue in 2017. Through 2021, we project average annual job growth of 13,200, representing 42% of new positions created throughout the metro area. We expect the health, technology, construction, and food services industries to fuel job growth in the period ahead. FLEX/INDUSTRIAL TRENDS 10-YEAR TREND OVERALL RENTAL RATES 6.9% UNDER CONSTRUCTION JOB GROWTH Vacancy rate ticks down 175,000 SF Robust demand during Q1 $9.28 PSF Year-over-year asking rent increase of 2.2% 524,710 SF Controlled construction pipeline 27,600 Jobs During 12-months ending January 2017 FLEX /INDUSTRIAL AND DEMAND Pre-leased deliveries contribute to quarterly absorption During the first quarter, the direct vacancy rate for Northern Virginia flex/ industrial buildings declined 50 basis points to 6.9%. This figure sits well below the 10-year average of 9.3%. At 5.4% in March 2017, bulk warehouse had the lowest vacancy rate of the three property types during the first quarter.
NORTHERN VIRGINIA FLEX/INDUSTRIAL MARKET NORTHERN VIRGINIA FLEX/INDUSTRIAL NET AND 1.5 1.0 0.5 0.0-0.5-1.0-1.5 NET IN MILLIONS NORTHERN VIRGINIA FLEX/INDUSTRIAL ASKING RENTAL RATES $15 $14 $13 $12 $11 $10 $9 $8 $7 $6 NORTHERN VIRGINIA FLEX/INDUSTRIAL DEVELOPMENT PIPELINE MILLION SF 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 DIRECT RATE BULK WAREHOUSE FLEX/WAREHOUSE FLEX/R&D COMPLETED UNDER CONSTRUCTION PRE-LEASED UNDER CONSTRUCTION AVAILABLE 13% 12% 11% 10% 9% 8% 7% 6% 5% 4% During the first three months of 2017, Northern Virginia flex/industrial net absorption totaled 175,000 SF. Bulk warehouse made the most significant contribution to quarterly absorption, with net absorption of positive 100,000 SF. This quarter s figures are slightly below the 10- year quarterly average of 211,000 SF. Prince William County and the Dulles Corridor were submarket leaders in quarterly absorption, with positive 123,000 SF and 100,000 SF, respectively. Three pre-leased deliveries, 7800 Doane Road (51,925 SF pre-leased), 11991 Tac Court (24,000 SF pre-leased), and 8865 Mike Garcia Drive (13,518 SF pre-leased), contributed to this quarter s figures in Prince William County. In the Dulles Corridor, notable leases included Collins Brothers Worldwide taking 63,700 SF at 23005 Ladbrook Drive and IT Renew signing for 34,400 SF of bulk warehouse space at 45200 Prologis Plaza. FLEX/INDUSTRIAL RENTAL RATES Growth in asking rents of 2.2% year-over-year Average flex/industrial asking rents grew 0.1% during the first quarter of 2017 to $9.28; however, this quarter represents a 2.2% increase over the first quarter of 2016. Bulk warehouse and flex/warehouse both grew by 0.2% during first three months of the year; however, rents for flex/r&d space declined by 0.8%. FLEX/INDUSTRIAL SUPPLY AND DEVELOPMENT Development concentrated in Prince William County and the Dulles Corridor During the first quarter of 2017, five flex/industrial projects, representing 262,200 SF, delivered in Northern Virginia. Three projects, totaling 167,700 SF, delivered in Prince William County. The largest submarket delivery, a 103,850 SF bulk warehouse at 7800 Doane Road, was 50% leased upon completion. One project each delivered in the Dulles Corridor and the I-95 Corridor. The larger of the two projects, at 5325 Port Royal Road in Springfield, is a 62,500 SF bulk warehouse, which was 0% pre-leased at delivery. At March 2017, there was approximately 524,700 SF under construction or renovation, of which 8% was pre-leased. Development is concentrated in the Dulles Corridor and Prince William County, with Prince William County accounting for approximately 69% of the development. 2 REAL ESTATE OUTLOOK NORTHERN VIRGINIA FLEX/INDUSTRIAL MARKET Q1 2017
FLEX/INDUSTRIAL INVESTMENT MARKET Investment sales pick up during Q1 Four flex/industrial investment sales took place in Northern Virginia during the first three months of 2017, representing $141.5 million or $105 PSF. Notably, Matan Companies purchased a 502,830 SF bulk warehouse at 6295 Edsall Road from First Potomac Realty Trust for $75 million or $149. During 2016, investment sales totaled $288.7 million, or $129 PSF. Bulk warehouse space accounted for 53% of investment sales value during the first quarter, with flex/warehouse making up the remainder. Investor interest was strong in the I-95 Corridor, which accounted for 56% of sales value, with quarterly investment sales totaling $79.5 million or $146 PSF. Prince William County came in second, at 41%, with $58 million or $77 PSF in sales. FLEX/INDUSTRIAL MARKET OUTLOOK Declines in vacancy to be accompanied by increases in rents We expect Northern Virginia flex/industrial market fundamentals to continue to improve over the short-term. With this, we forecast the overall vacancy rate (inclusive of sublease space) will decline from 7.1% today to the mid-6% range by December 2017. E-commerce will help demand for flex industrial space outstrip supply during the year. As vacancy declines, rents should grow 3% to 4% for 2017. In addition to elevated demand, in the near term, the area s smaller development pipeline will help sustain vacancy rates lower than levels experienced historically. Given its growth potential, investors and developers, will likely be drawn to the market, offering upgraded, more efficient layouts and spaces that better support workflow, including superior trailer loading, clear heights, column spacing, and parking. Therefore, during 2017, we expect the Northern Virginia flex/industrial investment market to pick up speed. REAL ESTATE OUTLOOK NORTHERN VIRGINIA FLEX/INDUSTRIAL MARKET Q1 2017 4
NORTHERN VIRGINIA FLEX/INDUSTRIAL MARKET Northern Virginia Flex/Industrial Market Indicators PROPERTY CLASS INVENTORY UNDER CONSTRUCTION Q1 NET YTD NET DIRECT SUBLEASE SPACE OVERALL AVERAGE RATE PSF Bulk Warehouse 21,223,687 360,550 100,000 100,000 5.4% 0.0% 5.4% $7.84 Flex/Warehouse 59,812,380 164,160 65,000 65,000 7.2% 0.2% 7.4% $9.47 Flex/R&D 4,684,206 0 9,000 9,000 10.7% 0.5% 11.1% $13.14 Total 85,720,273 524,710 175,000 175,000 6.9% 0.2% 7.1% $9.28 Northern Virginia Flex/Industrial Market Notable Lease Transactions TENANT DEAL TYPE ADDRESS SUBMARKET SQUARE FEET BAE Systems Renewal 45479 Holiday Drive Dulles Corridor 102,400 Oberthur Technologies Renewal 4250 Pleasant Valley Drive Dulles Corridor 95,100 Collins Brothers Worldwide New Lease 23005 Ladbrook Drive Dulles Corridor 63,700 DynCorp International LLC New Lease 8350 Alban Road I-95 Corridor 40,900 IT Renew New Lease 45200 Prologis Plaza Dulles Corridor 34,400 Morgan Meredith & Associates, Inc. New Lease 22780 Indian Creek Drive Dulles Corridor 19,800 First Vehicle Services New Lease 42671 Dulles Trade Center Court Dulles Corridor 18,900 SOURCE: CoStar, County Newsletters, Washington Business Journal, Washington Post, Transwestern Northern Virginia Flex/Industrial Market Construction Activity SUBMARKET SQUARE FEET UNDER CONSTRUCTION/RENOVATION PERCENT PRE-LEASED Dulles Corridor 164,160 24% Prince William County 360,550 0% Total 524,710 8% 4 REAL ESTATE OUTLOOK NORTHERN VIRGINIA FLEX/INDUSTRIAL MARKET Q1 2017
NORTHERN VIRGINIA FLEX/INDUSTRIAL MARKET Northern Virginia Flex/Industrial Market Indicators SUBMARKET INVENTORY UNDER CONSTRUCTION Q1 NET YTD NET DIRECT SUBLEASE SPACE TOTAL AVERAGE RATE PSF Bulk Warehouse 304,912 0 0 0 0.0% 0.0% 0.0% N/A Flex/Warehouse 3,180,356 0 (26,000) (26,000) 4.0% 0.0% 4.0% $11.84 Flex/R&D 366,459 0 7,000 7,000 5.6% 0.0% 5.6% $13.00 Beltway (I-495) 3,851,727 0 (19,000) (19,000) 3.8% 0.0% 3.8% $11.96 Bulk Warehouse 4,938,291 0 10,000 10,000 4.5% 0.0% 4.5% $8.24 Flex/Warehouse 19,184,932 0 (39,000) (39,000) 7.2% 0.0% 7.2% $8.82 Flex/R&D 1,210,412 0 13,000 13,000 10.5% 0.0% 10.5% $13.97 I-95 Corridor 25,333,635 0 (16,000) (16,000) 6.9% 0.0% 6.9% $8.95 Bulk Warehouse 70,982 0 0 0 0.0% 0.0% 0.0% N/A Flex/Warehouse 1,575,134 0 (13,000) (13,000) 10.2% 0.7% 10.9% $14.21 Flex/R&D 592,480 0 0 0 20.8% 0.0% 20.8% $13.42 Reston/Herndon 2,238,596 0 (13,000) (13,000) 12.7% 0.5% 13.2% $13.99 Bulk Warehouse 10,969,948 0 44,000 44,000 6.5% 0.0% 6.5% $7.83 Flex/Warehouse 22,169,813 164,160 67,000 67,000 9.0% 0.5% 9.6% $10.54 Flex/R&D 2,181,789 0 (11,000) (11,000) 10.1% 1.0% 11.1% $12.97 Dulles Corridor 35,321,550 164,160 100,000 100,000 8.3% 0.4% 8.7% $9.85 Bulk Warehouse 4,939,554 360,550 46,000 46,000 4.1% 0.0% 4.1% $7.45 Flex/Warehouse 13,702,145 0 76,000 76,000 4.7% 0.0% 4.7% $7.56 Flex/R&D 333,066 0 0 0 2.3% 0.0% 2.3% $10.93 Prince William County 18,974,765 360,550 123,000 123,000 4.5% 0.0% 4.5% $7.59 Bulk Warehouse 21,223,687 360,550 100,000 100,000 5.4% 0.0% 5.4% $7.84 Flex/Warehouse 59,812,380 164,160 65,000 65,000 7.2% 0.2% 7.4% $9.47 Flex/R&D 4,684,206 0 9,000 9,000 10.7% 0.5% 11.1% $13.14 Northern Virginia Total 85,720,273 524,710 175,000 175,000 6.9% 0.2% 7.1% $9.28 CONTACT Elizabeth Norton Managing Research Director Mid-Atlantic 202.775.7026 elizabeth.norton@transwestern.com Claire Whitesell Research Associate Mid-Atlantic 202.775.7049 claire.whitesell@transwestern.com METHODOLOGY The information in this report is the result of a compilation of information on industrial/flex properties located in the Northern Virginia area. This report includes single-tenant, multi-tenant and owner-user office properties 15,000 SF and larger, excluding properties owned by a government agency. 7900 Tysons One Place, Suite 600 McLean, Virginia 22102 T 704.821.0040 www.transwestern.com Copyright 2017 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to First parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.