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Northern Virginia Office Report Q4 2022

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During the last quarter of the year, the trend of falling demand returned as more space came on the market. Vacancy however, remained flat due to some obsolete product being removed from the market with plans for other uses, mostly residential. A recent sale of 1901 N Moore in Rosslyn is an example which will be demolished, and a 27-story 423-unit multifamily building will be built in its place. The largest lease was a renewal signed by the United States Patents and Trademark Office for 1.6 million square feet in Alexandria. A sizeable deal, however, it is a reduction of over 800,000 square feet. 

Supply & Demand

Northern Virginia registered negative demand for the third quarter this year. The market had 363,809 square feet of space added to the market. This brought the total 2022 year-end demand to negative 1.26 million square feet. While negative, space was being given back at a slower rate than in 2020 and 2021 when 1.7 million and 2.8 million square feet of negative demand was registered. In the fourth quarter, Class A and Class B product had negative demand while Class C product remained flat. Class A gave back 348,067 square feet while Class B returned 16,255 square feet during the quarter.

During the fourth quarter, no buildings delivered in Northern Virginia. Just over 3.6 million square feet was still underway at the end of the year with Arlington County and Fairfax County being home to the majority of the development. Similarly to the District, Northern Virginia saw buildings proposed for office-to-residential conversions as vacancy continued to remain elevated in the market. 

Rental Rate

The overall average direct asking rate increased $0.24 during the quarter, ending at $34.27 per square foot. This marks a $0.20 increase in the rate from a year ago. The Class A rental rate rose $0.06 to end the quarter at $37.95 per square foot and is up $0.33 from this time last year. The Class B rate saw a substantial increase, ending the quarter at $31.96 per square foot, up $0.49 from last quarter.

Vacancy

The overall vacancy rate remained flat during the quarter, ending at 19.1 percent, but was up from 18.2 percent a year ago. The Class A vacancy rate ended the quarter at 20.4 percent, up from 20.1 percent last quarter. This is up 60-basis points from the start of 2022. The combined Class B/C rate decreased slightly, dropping 30-basis points to end at 17.9 percent.


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Northern Virginia Office Report Q4 2022

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