The trend of rising vacancy and falling demand in the Northern Virginia market continued during the second quarter. Vacancy rates reached 19.0 percent and over a million square feet of space has been returned so far in 2022. Notable deals signed this quarter include Boeing’s renewal and expansion at 460 Herndon Parkway for 204,617 square feet, Leidos’ renewal at 14668 Lee Road for 158,559 square feet and Accenture’s 120,687 square foot renewal at 800 N Glebe Road in the Ballston submarket.
Supply & Demand
Demand in Northern Virginia fell for the third consecutive quarter returning 522,850 square feet of space to the market. In the second quarter, Class A product was the largest contributor to the negative demand, with 385,327 square feet of negative net absorption. The combined Class B and C product also registered negative demand, returning 137,523 square feet to the market. Subsequently, overall absorption figures for Northern Virginia in the first half of the year reached negative one million square feet.
One building delivered during the quarter in the Tysons submarket. Tysons Central, a 360,237 square foot building at 1750 Tysons Central Street delivered. The building developed by Foulger-Pratt was fully vacant upon delivery. At the end of the quarter, just under four million square feet of construction was underway with half of that future inventory in Arlington County. This is down from the recent peak of over five million at the end of 2021.
The overall average direct asking rate increased $0.03 during the quarter, ending at $34.10 per square foot. This rate has remained stable since the onset of the pandemic, up $1.21 from two years ago. The Class A rental rate rose $0.11 to end the quarter at $37.78 per square foot. This is up $0.99 from the second quarter in 2020. The Class B rate increased $0.22 to end at $31.74 per square foot and was $30.64 back in Q2 2020.
The overall vacancy rate ended the quarter at 19.0 percent, up from 18. percent from the previous quarter and is a 80-basis point increase from a year ago. The Class A vacancy rate ended the quarter at 20.5 percent, up from 19.8 percent last quarter. The combined Class B/C rate decreased slightly, dropping
10-basis points to end at 17.6 percent.