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Northern Virginia Office Report Q1 2022

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The Northern Virginia office market continued to see negative demand to start the year. Construction remained high with 4.4 million square feet underway. Four deals over 100,000 square feet were signed during the quarter. T-Mobile signed for 190,000 square feet at 2340 Dulles Corner Boulevard, Rand Corporation renewed for 126,636 square feet at 1201 S Hayes Street, and Clark Construction signed a deal for 114,345 square feet at 7900 Westpark Drive in Tysons Corner.

Supply & Demand

Demand in Northern Virginia fell during the first quarter, returning 385,604 square feet of space to the market. A large factor in the negative demand came from the consolidation by Fannie Mae upon the delivery of its new location. Fannie Mae moved out of multiple buildings across Herndon and Reston to consolidate their footprint in the region. Class A product demand remained flat, with 3,555 square feet of net absorption, and the combined Class B/C product had negative absorption, with 389,159 square feet being returned to the market. While absorption figures are negative, they were an improvement from the peak losses where multiple quarters had over a million square feet of negative demand. 

Two buildings delivered during the quarter in Reston, 1950 and 2000 Opportunity Way. These buildings total 1.06 million square feet at the Reston Next development. Two notable leases within the towers were Fannie Mae, and Volkswagen which relocated their North America headquarters from Herndon. At the end of the quarter, 4.4 million square feet of construction was underway. 

Rental Rate

The overall average direct asking rate remained flat, increasing $0.01 during the quarter, ending at $34.05 per square foot. The Class A rental rate rose $0.06 to end at $37.67 per square foot. Class A rates are up $0.44 from a year ago. The Class B rate decreased $0.10 to end at $31.52 per square foot and was $31.13 a year ago. 

Vacancy

The overall vacancy rate ended the quarter at 18.7 percent, up from 18.1 percent at the start of the year. This is a 60-basis point increase from a year ago. The Class A vacancy rate ended at 19.8 percent, up from 19.0 percent last quarter. The combined Class B/C  vacancy rate increased from 17.4 percent to 17.7 percent during the same time frame.    


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Northern Virginia Office Report Q1 2022

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