The Northern Virginia office market saw negative demand during the quarter and construction remains high with nearly four million square feet underway. Notable leases this quarter were signed by Peraton at 1875 Explorer Street who leased 100,000 square feet, Clarabridge signed a new lease for 85,748 square feet at 1906 Reston Metro Plaza and ID.me leased sublet space at 1775 Tysons Boulevard totaling 60,673 square feet.
Supply & Demand
Demand in Northern Virginia fell during the fourth quarter, returning 123,399 square feet of space to the market. This brought the 2021 total net absorption to negative 2.4 million square feet, which mostly occurred in the first quarter when 1.8 million square feet was returned to the market. In the fourth quarter, Class A product had negative 105,909 square feet of demand and the combined Class B and C product also had negative absorption, with 17,490 square feet being returned to the market. While the third quarter broke the streak of negative demand, the fourth quarter’s negative absorption was less significant than many of the previous quarters during the pandemic.
One building was delivered during the quarter. 1902 Reston Metro Plaza delivered in the Reston submarket and is leased to ICF. At the end of the quarter, 4.2 million square feet of construction was underway. The buildings at RTC Next are close to delivering and will be the home to Fannie Mae and Volkswagen.
The overall average direct asking rate increased $0.07 during the fourth quarter to end at $34.04 per square foot. The Class A rental rate dropped $0.10 to end the quarter at $37.61 per square foot. While the Class A rate decreased during the quarter, it is $0.44 higher than it was at the end of 2020. The Class B rate increased $0.18 to end at $31.62 per square foot and was $31.43 a year ago. Overall rates have increased $0.47 from the start of the year.
The overall vacancy rate ended the quarter at 18.1 percent, up slightly from 18.0 percent at the end of the third quarter and marks a 100 basis point increase from a year ago. The Class A vacancy rate ended the quarter at 18.9 percent, up from 18.8 percent last quarter. The combined Class B/C rate remained stable at 17.3 percent during the same time frame.