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Northern Virginia Office Report Q3 2022

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The Northern Virginia market saw positive demand and a leveling of vacancy rates during the quarter, however, it is unclear whether this trend will continue. Vacancy ended the quarter at 18.9 percent while construction activity remained flat. Notable deals signed this quarter include Hilton Worldwide’s renewal for 220,000 square feet at 7930 Jones Branch Drive, Boeing’s renewal of 118,780 square feet at 12701 Fair Lakes Circle, and Maxar Technologies lease for 99,659 square feet at 2325 Dulles Corner Boulevard.

Supply & Demand

Demand in Northern Virginia was positive for the first time in four quarters, where 241,857 square feet of space was removed from the market. This brought year-to-date demand to negative 973,353 square feet. In the third quarter, Class A product was the only product type to register positive demand with 329,245 square feet of positive net absorption. The combined Class B and C product registered negative demand, returning 87,338 square feet to the market. Year-to-date absorption for all product types remained negative, however, Class A has faired better, returning 202,361 square feet compared to Class B/C which has returned 770,992 square feet so far in 2022.
During the quarter, no buildings delivered in Northern Virginia and just under four million square feet of space was underway. Arlington County and Fairfax County have the bulk of product currently being developed. Northern Virginia has continued to see buildings proposed for conversions and this may result in a reduction in inventory in the coming quarters.

Rental Rate

The overall average direct asking rate decreased $0.08 during the quarter, ending at $34.03 per square foot. The overall asking rate is up $0.04 from a year ago and is up $1.03 from three years ago. The Class A rental rate rose $0.11 to end the quarter at $37.89 per square foot. This is up $0.18 from this time last year. The Class B rate saw a decrease during the quarter, dropping $0.29 to end at $31.47 per square foot and was $31.42 a year ago.

Vacancy

The overall vacancy rate ended the quarter at 18.9 percent, down from 19.1 percent from the previous quarter and is a 
90-basis point increase from a year ago. The Class A vacancy rate ended the quarter at 20.2 percent, down from 20.5 percent last quarter. The combined Class B/C rate decreased slightly, dropping 10-basis points to end at 17.7 percent. 


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Northern Virginia Office Report Q3 2022

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