suburban maryland quarterly market reportthe washington, dc metropolitan commercial real estate...
TRANSCRIPT
Quarterly Market Report
4th Quarter 2017
Suburban Maryland
lpcwashingtondc.com
2
Table of Contents
Metropolitan D.C. Market Overview .....................................3
Suburban Maryland Quarterly Overview ............................5
Suburban Maryland Top Leases ........................................... 8
Suburban Maryland Top Sales .............................................. 9
Market Spotlight, 3Q 2017:
Bethesda-Chevy Chase ....................................................10
North Bethesda-Potomac ................................................ 12
Rockville ................................................................................ 14
North Rockville .................................................................... 16
Gaithersburg-Germantown ............................................. 18
Silver Spring .......................................................................... 19
Beltsville-Calverton ........................................................... 21
Greenbelt-College Park ................................................... 22
Landover-Largo-Capitol Heights .................................. 24
National Harbor-Oxon Hill .............................................. 25
Columbia South ................................................................. 26
Prince George’s County Industrial .................................27
Baltimore-Washington Corridor Industrial ................. 28
Frederick .............................................................................. 29
Frederick Flex .....................................................................30
Tysons Corner ..................................................................... 13
Paul Kern Senior Vice President
[email protected] | 202.513.6716
Brent Prossner Vice President
[email protected] | 202.513.6712
John Olson Senior Vice President
[email protected] | 202.513.6730
Jennifer Orr Associate
[email protected] | 202.513.6723
Maryland Leasing & Market Research
Overall Market Summary
Metropolitan D.C. Market Overview 4th Quarter 2017
The Washington, DC Metropolitan commercial real estate market is comprised of approximately 418.5 million square feet of rentable office space located in the District of Columbia, Northern Virginia, and Suburban Maryland.
The total vacancy rate decreased to 15.0% in the fourth quarter, down from 15.3% at the end of the third quarter. The market recorded 665,123 square feet of net absorption in the fourth quarter, representing a 34% decrease from the 1,007,692 square feet absorbed in the third quarter.
Leasing activity totaled approximately 7.8 million square feet in transactions signed. The largest lease executed was a pre-lease by the GSA-TSA for 622,812 square feet at 6595 Springfield Center Drive, a proposed building in Springfield, Virginia.
Two buildings, totaling 419,000 square feet, broke ground; bringing the year-to-date 2017 construction pipeline total to 8,465,966 square feet
(59% pre-leased). Six buildings, totaling 1,630,231 square feet (75% leased), delivered this quarter including the 552,781-square-foot CEB Tower at 1201 Wilson Boulevard in Arlington, Virginia.
There were twenty-three sale transactions in the fourth quarter, totaling $2.14 billion. The largest sale was 1800 M Street, NW in Washington, DC trading for $421,000,000 ($725 psf).
Average asking rental rates decreased $0.06 to $36.81 per square foot, Full Service.
From November 2016 - November 2017 the DC Metropolitan area had a net increase of 48,900 jobs (50,300 private sector, -1,400 government) representing 1.5% growth, while the unemployment rate decreased to 3.6%.
DC VA MDMetro Area (YTD)
Direct Vacancy (4Q 2017) 10.0% 15.4% 14.2% 14.2%
Total Vacancy (4Q 2017) 10.8% 16.2% 14.9% 15.0%
Total Net Absorption(SF, YTD 2017) 1,026,926 1,079,887 423,098 2.5 M SF
Leasing Activity (SF, YTD 2017) 9,079,227 13,237,848 3,930,614
26.2 M SF
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Outlook
Metropolitan D.C. Market Overview 4th Quarter 2017
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While market fundamentals strengthened in 2017, Metro Washington, DC is expected to remain a tenant’s market through 2018. Projects and trends to keep an eye on in 2018 include the upcoming deliveries of Midtown Center and Capitol Crossing and how they will impact their respective submarkets of the East End and Capitol Hill, respectively. Downtown Bethesda is heating up with proposed new developments and the future relocation of Marriott’s headquarters. While there’s a strong sense of optimism among defense contractors that the government’s emphasis on increased Department of Defense spending will be a boon for their industry in Northern Virginia, and the region in general.
The Washington, DC Metropolitan market had a strong finish to 2017. Vacancy decreased in DC and Suburban Maryland, while Northern Virginia remained flat. All three regions posted positive net absorption in the fourth quarter and the DC Metro absorbed approximately 2.5 million square feet in 2017. Sales volume totaled $7.33 billion in 2017 (a 12.1% increase from year-end 2016) and leasing activity totaled 26.2 million square feet (a 5.2% increase from year-end 2016). Regional employment experienced 1.5% of growth YOY ending November 2017, primarily driven by the private sector, specifically the Educational & Health Services industry. The DC Metro area’s unemployment rate decreased to 3.6%, out-pacing the 4.1% national average.
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Market Summary
Suburban Maryland 4th Quarter 2017
The Suburban Maryland office market, which encompasses Montgomery and Prince George’s Counties, totals approximately 87.8 million square feet of rentable space in 888 office buildings of 25,000 square feet and greater.
The market recorded a decrease in net absorption in the fourth quarter with 31,359 square feet absorbed, down from the 145,756 square feet absorbed in the previous quarter.
Direct vacancy decreased to 14.2%, down from 15.0% and total vacancy decreased to 14.9% from 15.5%.
There were five sale transactions in Suburban Maryland this quarter. 4550 Montgomery Avenue in the Bethesda/Chevy Chase submarket, sold to AXA Equitable Financial Services for $132 million. 7101 Wisconsin Avenue in the Bethesda/Chevy Chase submarket, sold to the Donohoe Companies for $105 million. 7900 Harkins Road in the Lanham submarket, sold to Kawa Capital Management, LLC for $82 million. 8455 Colesville Road in the Silver Spring submarket sold to Goodstone, LLC for $38.7 million. A portfolio sale including 8201, 8401, and 8331 Corporate Drive in the Landover/Largo/Capitol Heights submarket to Morning Calm Management for $16.5 million.
The largest public sector lease executed this quarter was a new lease by the NIH for 89,708 square feet at 2115 East Jefferson Street in the North Bethesda submarket.
The largest private sector lease was a 52,000-square-foot pre-lease signed by University Research Company at 5404 Wisconsin Avenue in the Bethesda/Chevy Chase submarket.
The year-over-year unemployment rate in Suburban Maryland increased to 3.3% in November 2017, up from 3.1% in November 2016.
From November 2016 to November 2017 employment in Suburban Maryland had a net increase of 13,613 new jobs, representing 2.1% growth. Sectors with the greatest amount of job growth were the Education and Health Services with 4,000 jobs, Leisure and Hospitality with 1,700 and Professional and Business Services with 1,700 jobs. The Government increased by 1,100 jobs.
4Q 2017 3Q 2017 4Q 2016
Direct Vacancy 14.2% 15.0% 16.4%
Total Vacancy 14.9% 15.5% 17.0%
NetAbsorption (SF) 31,359 145,756 268,085
Leasing Activity (SF) 1.0 M 1.2 M 1.4 M
Under Construction (SF) 1.0 M 1.1 M 130,089
Deliveries (SF) 0 0 103,550
Rental Rates(PSF, FS) $26.81 $26.68 $26.36
U/C Percent Pre-Leased 43% 43% 68%
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Deliveries vs. Under Construction
Deliveries | Net Absorption | Vacancy Rate
Absorption & Gross LeasingThe Suburban Maryland market recorded 31,359 square feet of net absorption in the fourth quarter, a decrease from the 145,756 square feet absorbed in the third quarter; totaling 423,098 square feet absorbed YTD 2017.
Eight of the Top Ten leases signed this quarter were in Montgomery County and ranged between 89,708 and 22,526 square feet.
Eight of the leases in the Top Ten this quarter were private sector transactions, while two were public sector.
In the fourth quarter, total leasing activity totaled 1,024,082 square feet, a 21% decrease from the 1,288,196 square feet leased in the third quarter.
The total average asking rental rate was $26.81 Full Service, up $0.13 from the previous quarter. The Class A asking rental rate was $28.68 Full Service in the fourth quarter, a $0.18 increase from the $28.50 asked in the third quarter.
0.0
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1.0
1.5
2.0
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Deliveries Under Construction
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22
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16.5%
14.8%
12.2%
Suburban Maryland 4th Quarter 2017
Vacancy Rate
The direct vacancy rate decreased to 14.2%, down from 15.0% in the fourth quarter, totaling approximately 12.4 million square feet. Total vacancy decreased to 14.9%, down from 15.5%, totaling approximately 13.0 million square feet.
The sublease vacancy rate decreased to 0.7% at the end of the fourth quarter, representing 581,547 square feet of vacant space.
The Class A vacancy rate decreased to 16.1% from 16.5% in the fourth quarter, totaling approximately 7.2 million square feet. The Class B vacancy rate decreased to 14.1% from 14.8% in the fourth quarter, totaling approximately 5.2 million square feet.
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Construction
Suburban Maryland 4th Quarter 2017
At the end of the fourth quarter 2017, there were five buildings under construction. 1000 Spring Street (Class A, 121,724 sf, 100% pre-leased) is set to deliver in May 2018. 4000 Garden City Drive (Class A, 176,000 sf, 100% pre-leased) is set to deliver in November 2018. 5801 University Research Court (Class A, 75,000 sf, 0% pre-leased) is set to deliver in December 2018. 4747 Bethesda Avenue (Class A, 300,000 sf, 49% pre-leased) and 7272 Wisconsin Avenue (Class A, 357,000 sf, 0% pre-leased) are set to deliver in late 2019.
Expect the private sector to continue to drive leasing activity and job growth, while the GSA (public sector) remains limited to short-term renewals and space consolidations.
Vacancy rates are expected to decline as a result of the private sector gaining confidence in an improving economy and is actively looking for longer lease terms.
Renovations to existing commodity buildings in mass transit oriented locations, should encourage tenant moves; as tenants seek more efficient, amenity rich, easily accessible space.
To be competitive landlords will continue to offer generous concession packages (TI Allowance and free rent).
Outlook
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Suburban Maryland 4th Quarter 2017
Top Ten LeasesIn the fourth quarter 2017, eight of the Top Ten leases were in Montgomery County and two were in Prince George’s County, with six of the top leas-es being new transactions. Eight of the leases in the Top Ten this quarter were private sector trans-actions, while two were public sector.
The largest lease executed in Montgomery County was a renewal for 89,708 square feet by the NIH at 2115 East Jefferson Street in the North Bethesda submarket.
There were four lease renewals this quarter in ad-dition to the NIH, which included Virginia College, LLC signing for 40,000 square feet, Van-Q renew-
ing 26,522 square feet, and the Technology Service Corporation signing for 22,526 square feet.
In Prince George’s County, the U.S. FEMA signed the largest lease of the quarter, by taking 54,000 square feet at 6511 America Boulevard in the Col-lege Park submarket.
The Suburban Maryland market totaled 1,024,082 square feet of leasing activity in the fourth quarter 2017, a decrease from the 1,288,196 square feet leased in the third quarter. This represents a 21% decrease in leasing activity. The market has totaled 3.9 million square feet leased YTD 2017.
2115 E. Jefferson St.
Tenant GSA-NIH
Size 89,708 SF
Type Renewal
2099 Gaither Rd.
Tenant Oil Price Information Service (OPIS)
Size 36,599 SF
Type New
6511 America Blvd.
Tenant U.S. FEMA
Size 54,000 SF
Type New
5425 Wisconsin Ave.
Tenant WTOP Radio
Size 30,612 SF
Type New
5404 Wisconsin Ave.
Tenant University Research Co.
Size 52,000 SF
Type New
2600 Tower Oaks Blvd.
Tenant Vari-Q
Size 26,522 SF
Type Renewal
4600 Powder Mill Rd.
Tenant Virginia College, LLC
Size 40,000 SF
Type Renewal
7501 Wisconsin Ave.
Tenant Bank of America - Merrill Lynch
Size 26,000 SF
Type New
962 Wayne Ave.
Tenant Technology Service Corporation
Size 22,526 SF
Type Renewal
6120 Executive Blvd.
Tenant APS
Size 40,000 SF
Type New
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Suburban Maryland Sales
8455 Colesville Rd.
Submarket Silver Spring
Date Sold December 2017
Price $38,700,000 ($179 PSF)
Buyer Goodstone, LLC
Seller BlackRock
Class A
Occupancy 63.5%
Suburban Maryland 4th Quarter 2017
8201, 8401 & 8331 Corporate Dr.
Submarket Landover/Largo/Capitol Heights
Date Sold December 2017
Price $16,500,000($54.36 PSF)
Buyer Morning Calm Management
Seller Redus Properties
Class B
Occupancy 66%
Comments 2 buildings and a plot of land
7900 Harkins Rd.
Submarket Lanham
Date Sold October 2017
Price $82,000,000 ($265 PSF)
Buyer Kawa Capital Management, LLC
Seller Cohen Equities
Class A
Occupancy 100%
4550 Montgomery Ave.
Submarket Bethesda/Chevy Chase
Date Sold October 2017
Price $132,810,000 ($381 PSF)
Buyer AXA Equitable Financial Services
Seller Rockpoint Group
Class A
Occupancy 97.0%
7101 Wisconsin Ave.
Submarket Bethesda/Chevy Chase
Date Sold October 2017
Price $105,725,000($457 PSF)
Buyer The Donohoe Companies
Seller Brandywine
Class A
Occupancy 97.2%
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HighlightsThe direct vacancy rate decreased to 8.4% in the fourth quarter 2017, down from 9.3% in the third quarter. Total vacancy decreased in the fourth quarter to 10.7%, down from 10.8% in the third quarter. Class A total vacancy decreased to 8.1% in the fourth quarter, down from 8.2% in the third quarter, while the asking rental rate average decreased to $39.50 Full Service in the fourth quarter, down $0.40 from the previous quarter.
Total net absorption increased to -20,588 square feet in the fourth quarter, up from -56,488 square feet absorbed in the third quarter.
Total leasing activity decreased in the fourth quarter to 368,935 square feet, down from 872,992 square feet leased in the previous quarter. Contributing tenants included University Research Company signing a 52,000-square-foot lease at 5404 Wisconsin Avenue and WTOP Radio signing a 30,612-square-foot lease at 5425 Wisconsin Avenue.
There are currently two buildings under construction in the Bethesda/Chevy Chase submarket; 7272 Wisconsin Avenue, a 357,700-square-foot, Class A office building and 4747 Bethesda Avenue, a 300,000-square-foot, Class A Office building.
10 Year Averages (2007 - 2016)
Total Absorption 52,012 SF / Year
Deliveries (SF) 58,550 SF / Year
Leasing Activity 893,194 SF / Year
Market Stats
Inventory 10.8 M SF
Direct Vacancy 8.4 %
Total Vacancy 10.7 %
YTD 2017 Absorption -235,884 SF
Under Construction 657,700 SF
Percent Pre-Leased 0%
YTD 2017 Deliveries 0 SF
Asking Rental Rates (Full Service)
2007: $35.57
PSF
2016: $37.43
PSF
YTD 2017: $36.73
PSF
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Market Spotlight
4th Quarter 2017Bethesda-Chevy Chase
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Market Spotlight
4th Quarter 2017Bethesda-Chevy Chase
Major Leases
Under Construction
Sales
Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants
7272 Wisconsin AveBethesda/Chevy Chase
357,000 SF 357,000 SF 0% N/A Carr Properties N/A
4747 Bethesda AveBethesda/Chevy Chase
300,000 SF 300,000 SF 49% N/A JBG Smith N/A
Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate
No sales this quarter.Bethesda/Chevy Chase
N/A N/A N/A N/A N/A N/a N/A
5404 Wisconsin Ave.
Tenant University Research Co.
Size 52,000 SF
Type New
5425 Wisconsin Ave.
Tenant WTOP Radio
Size 30,612 SF
Type New
7501 Wisconsin Ave.
Tenant Bank of America - Merrill Lynch
Size 26,000 SF
Type New
4350 East West Hwy.
Tenant Pharmerit
Size 17,979 SF
Type New
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HighlightsThe direct vacancy rate decreased to 20.5% in the fourth quarter 2017, down from 20.8% in the third quarter. Total vacancy decreased to 20.7% in the fourth quarter, down from 21.0% in the previous quarter. Class A total vacancy decreased to 21.9% in the fourth quarter, down from 22.3% in the third quarter, while the asking rental rate average decreased to $29.37 Full Service in fourth quarter, down $0.02 from the previous quarter.
Total net absorption increased to 6,354 square feet in the fourth quarter, up from the 1,834 square feet absorbed in the third quarter.
Total leasing activity increased in the fourth quarter to 144,578 square feet, up from 45,790 square feet leased in the previous quarter. Contributing tenants included the NIH renewing a 89,708-square-foot lease at 2115 East Jefferson Street and APS signed a 40,000-square-foot lease at 6120 Executive Boulevard.
10 Year Averages (2007 - 2016)
Total Absorption -43,739 SF / Year
Deliveries (SF) 98,256 SF / Year
Leasing Activity 745,714 SF / Year
Market Stats
Inventory 10.7 M SF
Direct Vacancy 20.5 %
Total Vacancy 20.7 %
YTD 2017 Absorption 96,163 SF
Under Construction 0 SF
Percent Pre-Leased 0%
YTD 2017 Deliveries 0 SF
Asking Rental Rates (Full Service)
2007: $30.59
PSF
2016: $28.93
PSF
YTD 2017: $28.59
PSF
-0.75
-0.50
-0.25
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Deliveries Under Construction Total Net Absorption0
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Vaca
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ate (
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Market Spotlight
4th Quarter 2017North Bethesda-Potomac
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Market Spotlight
4th Quarter 2017North Bethesda-Potomac
Major Leases
Under Construction
Sales
Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants
No new construction during this quarter.
North Bethesda
N/A N/A N/A N/A N/A N/A
Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate
No sales this quarter. North Bethesda
N/A N/A N/A N/A N/A N/a N/A
2115 E. Jefferson St.
Tenant GSA - NIH
Size 89,708 SF
Type Renewal
6120 Executive Blvd.
Tenant APS
Size 40,000 SF
Type New
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HighlightsThe direct vacancy rate increased to 11.4% in the fourth quarter 2017, up from 11.3% in the third quarter. Total vacancy increased to 11.8% in the fourth quarter, up from 11.6% in the previous quarter. Class A total vacancy increased to 20.0% in the fourth quarter, up from 18.9% in the third quarter, while the asking rental rate average decreased to $32.61 Full Service in fourth quarter, down $0.02 from the previous quarter.
Total net absorption decreased to -21,898 square feet in the fourth quarter, down from 80,457 square feet absorbed in the third quarter.
Total leasing activity decreased in the fourth quarter to 69,086 square feet, down from 98,300 square feet leased in the previous quarter. Contributing tenants included Fitzgerald Management Group renewing a 12,895-square-foot lease at 600 Jefferson Plaza.
10 Year Averages (2007 - 2016)
Total Absorption 109,662 SF / Year
Deliveries (SF) 195,970 SF / Year
Leasing Activity 740,872 SF / Year
Market Stats
Inventory 9.8 M SF
Direct Vacancy 11.4 %
Total Vacancy 11.8 %
YTD 2017 Absorption 134,971 SF
Under Construction 0 SF
Percent Pre-Leased 0%
YTD 2017 Deliveries 0 SF
Asking Rental Rates (Full Service)
2007: $32.51
PSF
2016: $30.65
PSF
YTD 2017: $31.06
PSF
-0.2
-0.1
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Deliveries Under Construction Total Net Absorption0
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Vaca
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Market Spotlight
4th Quarter 2017Rockville
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Market Spotlight
4th Quarter 2017Rockville
Major Leases
Under Construction
Sales
Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants
No new construction during this quarter Rockville N/A N/A N/A N/A N/A N/A
Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate
No sales this quarter Rockville N/A N/A N/A N/A N/A N/A N/A
2600 Tower Oaks Blvd.
Tenant Vari-Q
Size 22,298 SF
Type Renewal
600 Jefferson Plz.
Tenant Fitzgerald Management Group
Size 12,895 SF
Type Renewal
111 Rockville Pke.
Tenant RBC Capital Markets
Size 11,963 SF
Type Renewal
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HighlightsThe direct vacancy rate decreased to 16.6% in the fourth quarter 2017, down from 17.7% in the third quarter. Total vacancy decreased to 17.6% in the fourth quarter, down from 18.9% in the previous quarter. Class A total vacancy decreased to 18.3% in the fourth quarter, down from 19.2% in the third quarter, while the asking rental rate average decreased to $28.19 Full Service in fourth quarter, down $0.02 from the previous quarter.
Total net absorption increased to 105,429 square feet in the fourth quarter, up from the -5,551 square feet absorbed in the third quarter. Contributing to the positive absorption included Oil Price Information Service signing a 36,599-square-foot lease at 2099 Gaither Road and Skanksa renewing a 14,918-square-foot lease at 700 King Farm Boulevard.
Total leasing activity increased in the fourth quarter to 145,481 square feet, up from 95,754 square feet leased in the previous quarter. Contributing tenants included OPIS signing a 36,599-square-foot lease at 2099 Gaither Road.
10 Year Averages (2007 - 2016)
Total Absorption 62,184 SF / Year
Deliveries (SF) 171,141 SF / Year
Leasing Activity 956,330 SF / Year
Market Stats
Inventory 13.2 M SF
Direct Vacancy 16.6 %
Total Vacancy 17.6 %
YTD 2017 Absorption 150,105 SF
Under Construction 0 SF
Percent Pre-Leased 0%
YTD 2016 Deliveries 0 SF
Asking Rental Rates (Full Service)
2007: $27.67
PSF
2016: $24.99
PSF
YTD 2017: $26.02
PSF
-0.25
0.00
0.25
0.50
0.75
1.00
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Deliveries Under Construction Total Net Absorption
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Vaca
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Market Spotlight
4th Quarter 2017North Rockville
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Market Spotlight
4th Quarter 2017North Rockville
Major Leases
Under Construction
Sales
Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants
No new construction during the quarter N. Rockville N/A N/A N/A N/A N/A N/A
Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate
No sales this quarter N. Rockville N/A N/A N/A N/A N/A N/A N/A
2099 Gaither Rd.
Tenant Oil Price Information Service
Size 36,599 SF
Type New
700 King Farm Blvd.
Tenant Skanska
Size 14,918 SF
Type Renewal
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HighlightsThe direct vacancy rate decreased to 9.7% in the fourth quarter 2017, down from 10.5% in the third quarter. Total vacancy decreased to 10.0% in the fourth quarter, down from 10.5% in the third quarter. Class A total vacancy increased to 10.8% in the fourth quarter, up from 10.7% in the third quarter, while the asking rental rate average decreased to $24.45 Full Service in fourth quarter, down $0.02 from the previous quarter.
Total net absorption decreased to -50,116 square feet in the fourth quarter, down from 22,221 square feet absorbed in the third quarter.
Total leasing activity increased in the fourth quarter to 46,333 square feet, up from 12,140 square feet leased in the previous quarter. Contributing tenants included Antezana & Antezana signing a 2,366-square-foot lease at 18310 Montgomery Village Avenue and Homefix signing a 2,479-square-foot lease at 350 Christopher Avenue.
10 Year Averages (2007 - 2016)
Total Absorption 29,810 SF / Year
Deliveries (SF) 65,692 SF / Year
Leasing Activity 405,706 SF / Year
Market Stats
Inventory 9.0 M SF
Direct Vacancy 9.7 %
Total Vacancy 10.0 %
YTD 2017 Absorption -7,229 SF
Under Construction 0 SF
Percent Pre-Leased 0%
YTD 2017 Deliveries 0 SF
Asking Rental Rates (Full Service)
2007: $22.32
PSF
2016: $23.94
PSF
YTD 2017: $23.63
PSF
-0.5
0.0
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Deliveries Under Construction Total Net Absorption0
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Vaca
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Market Spotlight
4th Quarter 2017Gaithersburg-Germantown
19 lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600
HighlightsThe direct vacancy rate increased to 10.4% in the fourth quarter 2017, up from 10.1% in the third quarter. Total vacancy increased to 11.2% in the fourth quarter, up from 10.8% in the third quarter. Class A total vacancy increased to 12.0% in the fourth quarter, up from 11.6% in the previous quarter. The Class A asking rental rate average increased to $30.47 Full Service in fourth quarter, up $0.27 from the previous quarter.
Total net absorption decreased to -22,508 square feet in the fourth quarter, down from -8,960 square feet absorbed in the third quarter.
Total leasing activity increased in the fourth quarter to 94,206 square feet, up from 55,529 square feet leased in the previous quarter. Contributing tenants included Technology Service Corporation renewing a 22,526-square-foot lease at 962 Wayne Avenue and Torti Gallas Partners renewing a 22,363-square-foot lease at 1300 Spring Street.
There is currently one building under construction. 1000 Spring Street is a Class A, 121,724-square-foot building, set to deliver in May 2018.
10 Year Averages (2007 - 2016)
Total Absorption -32,875 SF / Year
Deliveries (SF) 5,000 SF / Year
Leasing Activity 451,045 SF / Year
Market Stats
Inventory 6.3 M SF
Direct Vacancy 10.4 %
Total Vacancy 11.2 %
YTD 2017 Absorption -52,161 SF
Under Construction 121,724 SF
Percent Pre-Leased 100 %
YTD 2017 Deliveries 0 SF
Asking Rental Rates (Full Service)
2007: $28.66
PSF
2016: $28.69
PSF
YTD 2017: $29.33
PSF
-0.75
-0.50
-0.25
0.00
0.25
0.50
'17'16'15'14'13'12'11'10'09'08'07
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illio
ns)
Deliveries Under Construction Total Net Absorption0
2
4
6
8
10
12
14
16
'17'16'15'14'13'12'11'10'09'08'07
Direct Vacancy Rate Total Vacancy Rate
Vaca
ncy R
ate (
%)
Market Spotlight
4th Quarter 2017Silver Spring
20lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600
Market Spotlight
4th Quarter 2017Silver Spring
Major Leases
Under Construction
Sales
Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants
1000 Spring St. Silver Spring 121,724 SF 0 SF 100% 5/2018United Therapeutics Corporation
United Therapeutics Corporation
Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate
8455 Colesville Rd. Silver Spring
12/2017$38,700,000($179 PSF)
Goodstone, LLC
BlackRock A 63.5% N/A
962 Wayne Ave.
Tenant Technology Service Corporation
Size 22,256 SF
Type Renewal
1300 Spring St.
Tenant Torti Gallas Partners
Size 22,363 SF
Type Renewal
21 lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600
HighlightsThe direct vacancy rate decreased to 32.2% in the fourth quarter 2017, down from 36.5% in the third quarter. Total vacancy decreased to 32.2% in the fourth quarter, down from 36.5% in the third quarter. Class A total vacancy decreased to 50.7% in the fourth quarter, down from 57.8% in the third quarter, while the asking rental rate average increased to $21.85 Full Service in fourth quarter, up $0.04 from the previous quarter.
Total net absorption increased to 85,097 square feet in the fourth quarter, up from 2,207 square feet absorbed in the third quarter.
Total leasing activity increased in the fourth quarter to 47,977 square feet, up from 13,398 square feet leased in the previous quarter. Contributing tenants included Virginia College, LLC renewing a 40,000-square-foot lease at 4600 Powder Mill Road.
10 Year Averages (2007 - 2016)
Total Absorption -23,139 SF / Year
Deliveries (SF) 0 SF / Year
Leasing Activity 81,074 SF / Year
Market Stats
Inventory 1.6 M SF
Direct Vacancy 32.2 %
Total Vacancy 32.2 %
YTD 2017 Absorption -28,712 SF
Under Construction 0 SF
Percent Pre-Leased 0%
YTD 2017 Deliveries 0 SF
Asking Rental Rates (Full Service)
2007: $20.99
PSF
2016: $20.77
PSF
YTD 2017: $21.43
PSF
-0.50
-0.25
0.00
0.25
0.50
'17'16'15'14'13'12'11'10'09'08'07
SF (M
illio
ns)
Deliveries Under Construction Total Net Absorption0
5
10
15
20
25
30
35
40
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Vaca
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ate (
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Market Spotlight
4th Quarter 2017Beltsville-Calverton
22 lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600
HighlightsThe direct vacancy rate decreased to 19.2% in the fourth quarter, down from 20.3% in the third quarter. The total vacancy rate decreased to 19.3% in the fourth quarter, down from 20.5% in the third quarter. Class A total vacancy decreased to 17.7% in the fourth quarter, down from 18.8% in the previous quarter. The Class A asking rental rate average decreased to $23.55 Full Service in fourth quarter, down $0.01 from the previous quarter.
Total net absorption decreased to 47,849 square feet in the fourth quarter, down from 81,138 square feet absorbed in the third quarter.
Total leasing activity increased in the fourth quarter to 101,485 square feet, up from 85,389 square feet leased in the previous quarter. Contributing tenants included FEMA signing a 54,000-square-foot lease at 6511 America Boulevard and The National Center for Children signing a 12,616-square-foot lease at 6404 Ivy Lane.
5801 University Research Court (Class A, 75,000 sf, 0% pre-leased) is currently under construction and set to deliver in December 2018.
10 Year Averages (2007 - 2016)
Total Absorption 16,976 SF / Year
Deliveries (SF) 77,187 SF / Year
Leasing Activity 453,743 SF / Year
Market Stats
Inventory 7.3 M SF
Direct Vacancy 19.2 %
Total Vacancy 19.3 %
YTD 2017 Absorption 247,149 SF
Under Construction 75,000 SF
Percent Pre-Leased 0 %
YTD 2017 Deliveries 0 SF
Asking Rental Rates (Full Service)
2007: $22.97
PSF
2016: $21.15
PSF
YTD 2017: $22.24
PSF
-0.3
-0.1
0.1
0.3
'17'16'15'14'13'12'11'10'09'08'07
SF (M
illio
ns)
Deliveries Under Construction Total Net Absorption0
4
8
12
16
20
24
28
'17'16'15'14'13'12'11'10'09'08'07
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Vaca
ncy R
ate (
%)
Market Spotlight
4th Quarter 2017Greenbelt-College Park
23lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600
Market Spotlight
4th Quarter 2017Greenbelt-College Park
Major Leases
Under Construction
Sales
Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants
5801 University Research Court
Greenbelt/College Park
75,000 SF 75,000 SF 0%December 2018
Corporate Office Properties Trust
N/A
Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate
No sales this quarterGreenbelt/College Park
N/A N/A N/A N/A N/A N/A N/A
6511 America Blvd.
Tenant U.S. FEMA
Size 54,000 SF
Type New
6404 Ivy Ln.
Tenant The National Center for Children
Size 12,616 SF
Type New
24 lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600
HighlightsThe direct vacancy rate decreased to 19.1% in the fourth quarter 2017, down from 21.1% in the third quarter. Total vacancy decreased to 19.3% in the fourth quarter, down from 21.3% in the third quarter. Class A total vacancy increased to 22.6% in the fourth quarter, up from 22.2% in the previous quarter. The Class A asking rental rate average increased to $25.21 Full Service in the fourth quarter, up $0.26from the previous quarter.
Total net absorption decreased to -44,373 square feet in the fourth quarter, down from -17,491 square feet absorbed in the third quarter.
Total leasing activity decreased in the fourth quarter to 3,496 square feet, down from 7,112 square feet leased in the previous quarter.
10 Year Averages (2007 - 2016)
Total Absorption -2,649 SF / Year
Deliveries (SF) 11,293 SF / Year
Leasing Activity 169,302 SF / Year
Market Stats
Inventory 2.8 M SF
Direct Vacancy 19.1 %
Total Vacancy 19.3 %
YTD 2017 Absorption -132,071 SF
Under Construction 0 SF
Percent Pre-Leased 0%
YTD 2017 Deliveries 0 SF
Asking Rental Rates (Full Service)
2007: $23.90
PSF
2016: $21.71
PSF
YTD 2017: $22.65
PSF
-0.3
-0.1
0.1
0.3
'17'16'15'14'13'12'11'10'09'08'07
SF (M
illio
ns)
Deliveries Under Construction Total Net Absorption0
4
8
12
16
20
24
28
32
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Direct Vacancy Rate Total Vacancy Rate
Vaca
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ate (
%)
Market Spotlight
4th Quarter 2017Landover-Largo-Capitol Heights
25 lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600
HighlightsBoth the direct and total vacancy decreased to 13.5% in the fourth quarter 2017, down from 13.8% in the third quarter. Class A total vacancy decreased to 11.8% in the fourth quarter, down from 12.1% in the third quarter, while the asking rental rate average increased to $30.06 Full Service in fourth quarter, up $2.64 from the previous quarter.
Total net absorption decreased to 3,537 square feet in the fourth quarter, down from 40,049 square feet absorbed in the third quarter.
Total leasing activity increased in the fourth quarter to 2,505 square feet, up from 1,792 square feet leased in the previous quarter.
10 Year Averages (2007 - 2016)
Total Absorption 13,520 SF / Year
Deliveries (SF) 21,209 SF / Year
Leasing Activity 52,093 SF / Year
Market Stats
Inventory 1.0 M SF
Direct Vacancy 13.5 %
Total Vacancy 13.5 %
YTD 2017 Absorption 50,788 SF
Under Construction 0 SF
Percent Pre-Leased 0 %
YTD 2017 Deliveries 0 SF
Asking Rental Rates (Full Service)
2007: $29.39
PSF
2016: $25.12
PSF
YTD 2017: $29.21
PSF
-0.05
0.05
0.15
'17'16'15'14'13'12'11'10'09'08'07
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illio
ns)
Deliveries Under Construction Total Net Absorption0
5
10
15
20
25
30
35
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Vaca
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Market Spotlight
4th Quarter 2017National Harbor-Oxon Hill
26 lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600
HighlightsThe direct vacancy rate increased to 7.7% in the fourth quarter 2017, up from 5.8% in the third quarter. Total vacancy increased to 7.9% in the fourth quarter, up from 6.0% in the third quarter. Class A total vacancy increased to 6.3% in the fourth quarter,up from 4.7% in the third quarter. Class A asking rental rate average increased to $27.08 Full Service in the fourth quarter, up $0.02 from the previous quarter.
Total net absorption decreased to -38,117 square feet in the fourth quarter, down from -12,292 square feet absorbed in the third quarter.
Total leasing activity increased in the fourth quarter to 177,557 square feet, up from 166,070 square feet leased in the previous quarter.
8110 Maple Lawn Boulevard, a 104,412-square-foot Class A building, delivered 30% leased in December 2017.
10 Year Averages (2007 - 2016)
Total Absorption 278,771 SF / Year
Deliveries (SF) 249,689 SF / Year
Leasing Activity 793,730 SF / Year
Market Stats
Inventory 9.2 M SF
Direct Vacancy 7.7 %
Total Vacancy 7.9 %
YTD 2017 Absorption -39,444 SF
Under Construction 0 SF
Percent Pre-Leased 0 %
YTD 2017 Deliveries 104,412 SF
Asking Rental Rates (Full Service)
2007: $23.79
PSF
2016: $24.75
PSF
YTD 2017: $25.12
PSF
-0.25
0.00
0.25
0.50
0.75
1.00
'17'16'15'14'13'12'11'10'09'08'07
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illio
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Deliveries Under Construction Total Net Absorption
0
4
8
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16
20
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Market Spotlight
4th Quarter 2017Columbia South
27 lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600
HighlightsThe direct vacancy rate increased to 11.4% in the fourth quarter 2017, up from 11.2% in the third quarter. Total vacancy decreased to 12.4% in the fourth quarter, down from 12.8% in the previous quarter.
Total net absorption significantly decreased to 52,074 square feet in the fourth quarter, down from 288,610 square feet absorbed in the third quarter.
Total leasing activity increased in the fourth quarter to 321,766 square feet, up from 33,055 square feet leased in the previous quarter. Contributing tenants included Upper Crust Bakery signing a 129,988-square-foot lease at 7100 Holladay Tyler Road in the Bowie industrial submarket.
There are currently two buildings under construction in Prince George’s County. 9300 Alaking Court is a Class A building containing 46,168 square feet and is set to deliver in January 2018. 7501 Andrews Federal Campus Drive is a 167,033-square-foot, Class A building set to deliver in September 2018.
6240 Columbia Park Road, a Class A building containing 95,000 square feet delivered in November 2017. The building is currently vacant.
10 Year Averages (2007 - 2016)
Total Absorption 258,802 SF / Year
Deliveries (SF) 325,292 SF / Year
Leasing Activity 1.0 SF / Year
Market Stats
Inventory 21.4 M SF
Direct Vacancy 11.4 %
Total Vacancy 12.4 %
YTD 2017 Absorption -93,630 SF
Under Construction 213,201 SF
Percent Pre-Leased 0 %
YTD 2017 Deliveries 383,000 SF
Asking Rental Rates (Triple Net)
2007: $6.64
PSF
2016: $7.09
PSF
YTD 2017: $6.54
PSF
-0.5
0.0
0.5
1.0
1.5
'17'16'15'14'13'12'11'10'09'08'07
SF (M
illio
ns)
Deliveries Under Construction Total Net Absorption0
3
6
9
12
15
18
'17'16'15'14'13'12'11'10'09'08'07
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Vaca
ncy R
ate (
%)
Market Spotlight
4th Quarter 2017Prince George’s County Industrial
28 lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600
HighlightsThe direct vacancy rate increased to 10.1% in the fourth quarter 2017, up from 9.5% in the third quarter. Total vacancy increased to 10.5% in the fourth quarter, up from 9.9% in the third quarter.
Total net absorption increased to 489,076 square feet in the fourth quarter, up from the 42,883 square feet absorbed in the third quarter.
Total leasing activity decreased in the fourth quarter to 449,942 square feet, down from 622,597 square feet leased in the previous quarter. Contributing tenants included U.S. Recycle Group signing a 48,013-square-foot lease at 8205 Patuxent Range Road in the Route 1 Industrial submarket.
There are currently six building under construction. 5350 Holabird Avenue (140,400 sf, 0% pre-leased) is set to deliver in January 2018. 8260 Lokus Road (35,000 sf, 0% pre-leased) is set to deliver in April 2018. 7149 Ridge Road (220,000 sf, 100% pre-leased) is set to deliver in June 2018. 7171 Dorsey Run Road (93,500 sf, 0% pre-leased) is set to deliver in June 2018. 7200 Dorsey Run Road (126,000 sf, 0% pre-leased) is set to deliver in June 2018. 7600 Perryman Court (500,400 sf, 0% pre-leased) is set to deliver in June 2018.
One building delivered in the fourth quarter 2017. 5300 Holabird Avenue (413,100 sf, 0% pre-leased) is set to deliver in December 2017.
10 Year Averages (2007 - 2016)
Total Absorption 515,784 SF / Year
Deliveries (SF) 595,499 SF / Year
Leasing Activity 4.0 M SF / Year
Market Stats
Inventory 50.3 M SF
Direct Vacancy 10.1 %
Total Vacancy 10.5 %
YTD 2017 Absorption 1,735,820 SF
Under Construction 1,115,300 SF
Percent Pre-Leased 17 %
YTD 2017 Deliveries 702,550 SF
Asking Rental Rates (Triple Net)
2007: $5.02
PSF
2016: $5.51 PSF
YTD 2017: $5.15PSF
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
'17'16'15'14'13'12'11'10'09'08'07
SF (M
illio
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Deliveries Under Construction Total Net Absorption0
3
6
9
12
15
'17'16'15'14'13'12'11'10'09'08'07
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Vaca
ncy R
ate (
%)
Market Spotlight
4th Quarter 2017
Baltimore-Washington Corridor Industrial
29 lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600
HighlightsThe direct vacancy rate decreased to 11.1% in the fourth quarter 2017, down from 11.5% in the third quarter. Total vacancy decreased to 11.9% in the fourth quarter, down from 12.4% in the third quarter.
Total net absorption decreased to 63,996 square feet in the fourth quarter, down from 78,172 square feet absorbed in the third quarter.
Total leasing activity decreased in the fourth quarter to 23,052 square feet, down from 44,978 square feet leased in the previous quarter. Contributing tenants included Center for Advanced Orthopedics signing a 5,247-square-foot lease at 165 Thomas Jefferson Drive.
10 Year Averages (2007 - 2016)
Total Absorption 41,083 SF / Year
Deliveries (SF) 57,071 SF / Year
Leasing Activity 270,691 SF / Year
Market Stats
Inventory 4.3 M SF
Direct Vacancy 11.1 %
Total Vacancy 11.9 %
YTD 2017 Absorption 105,559 SF
Under Construction 0 SF
Percent Pre-Leased 0%
YTD 2017 Deliveries 0 SF
Asking Rental Rates (Full Service)
2007: $16.71
PSF
2016: $18.31
PSF
YTD 2017: $20.08
PSF
-0.5
-0.3
-0.1
0.1
0.3
0.5
'17'16'15'14'13'12'11'10'09'08'07
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illio
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Deliveries Under Construction Total Net Absorption4
8
12
16
20
24
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Vaca
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ate (
%)
Market Spotlight
4th Quarter 2017Frederick Office
30 lpcwashingtondc.com101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.67001530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600
HighlightsThe direct vacancy rate decreased to 8.9% in the fourth quarter 2017, down from 9.1% in the third quarter. Total vacancy decreased to 9.0% in the fourth quarter, down from 9.5% in the third quarter.
Total net absorption increased to 15,373 square feet in the fourth quarter, up from -26,865 square feet absorbed in the third quarter.
Total leasing activity decreased in the fourth quarter to 27,120 square feet, down from 85,704 square feet leased in the previous quarter. Contributing tenants included Sierra Construction signing a 3,084-square-foot lease at 5340 Spectrum Drive.
10 Year Averages (2007 - 2016)
Total Absorption 96,100 SF / Year
Deliveries (SF) 88,957 SF / Year
Leasing Activity 190,949 SF / Year
Market Stats
Inventory 3.8 M SF
Direct Vacancy 8.9 %
Total Vacancy 9.0 %
YTD 2017 Absorption 60,132SF
Under Construction 0 SF
Percent Pre-Leased 0 %
YTD 2017 Deliveries 0 SF
Asking Rental Rates (Triple Net)
2007: $14.50
PSF
2016: $13.11
PSF
YTD 2017: $10.38
PSF
-0.25
0.00
0.25
0.50
0.75
1.00
'17'16'15'14'13'12'11'10'09'08'07
SF (M
illio
ns)
Deliveries Under Construction Total Net Absorption8
12
16
20
24
28
'17'16'15'14'13'12'11'10'09'08'07
Direct Vacancy Rate Total Vacancy Rate
Vaca
ncy R
ate (
%)
Market Spotlight
4th Quarter 2017Frederick Flex