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Northern Virginia Office Report Q2 2021

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Leasing activity was led by Raytheon who signed a renewal for 521,366 square feet in the Route 28 North corridor. The largest government deal signed in Northern Virginia during the second quarter was the Department of State at 1400 Wilson, signing for 108,296 square feet. Absorption in the market continued to be negative, but the pace that space was being returned slowed. Market rents saw a slight rebound from the decrease seen from the previous quarter.

Supply & Demand

Demand in Northern Virginia continued to drop during the second quarter of 2021, totaling negative 463,647 square feet. This resulted in absorption totaling negative 2.4 million square feet during the first half of the year, compared to the first half of 2020 which totaled 546,434 square feet of positive demand. Demand started to fall after Q2 2020, with the quarterly average being just over a million square feet of negative absorption up until this quarter. Prior to 2020, absorption in Northern Virginia was positive for nine consecutive quarters with an average of 690,001 square feet of quarterly absorption. In the second quarter of this year, all three classes of space had negative demand, with Class B seeing the largest drop with 368,212 square feet returned.

The second quarter had no space deliver to the market and 4.26 million square feet of construction was underway, up from the same time last year when it stood at 3.20 million square feet.

Rental Rate

The overall average direct asking rate increased $0.27 during the second quarter. Class A product had a $0.20 increase to end the quarter at $37.43 per square foot. Class B space increased $0.11 in direct average asking rates to end at $31.24 per square foot. Overall rental rates have rebounded from the decrease seen from the first quarter.

Vacancy

The overall vacancy rate crossed the 18 percent threshold this quarter, ending at 18.1 percent. This is the highest the vacancy rate has been in the market since Q4 2017 when it also stood at 18.1 percent and is up from 16.1 percent a year ago. The Class A vacancy rate increased 10 basis points to end the quarter at 19.1 percent. The combined Class B/C product rose from 16.9 percent to 17.3 percent.


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Northern Virginia Office Report Q2 2021

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