Cushman & Wakefield predicts tough 2013 for Northern Virginia
- December 31, 2012
The Northern Virginia market will face a tough year in 2013 because of BRAC vacancies, proposed government budget cuts and ongoing economic uncertainty, according to a market report by Cushman & Wakefield.
The report said that the Crystal City and the Rosslyn-Ballston corridors will be particularly affected by vacancies created by the Base Realignment and Closure Commission’s relocation of thousands of government and military workers from Arlington County to Fort Belvoir in Fairfax County.
During the third quarter of 2012, Arlington County’s vacancy rate rose 7.7 percentage points from the first quarter of 2011 to 15.9 percent, the highest vacancy rate in the last decade, according to the report.
The report looked at three submarkets in Northern Virginia:
Crystal City will be hit especially hard by the BRAC relocations. The submarket’s Class A direct vacancy rate rose 14.5 percentage points from a year ago to 22.3 percent. The average rental rate, however, has increased 2.7 percent from the beginning of 2012 to the third quarter because higher quality office space has returned to the market. However, the report predicts rents will contract in 2013 and not grow until 2015 and beyond.
The Rosslyn-Ballston Corridor will have 5 percent of its inventory affected by BRAC relocations. The class A overall vacancy is expected to remain in the double-digits, not falling below 15 percent, but return to single digits by 2016 as the national economy recovers.
The area of Springfield/Annandale/Bailey’s saw leasing demand slow in 2012. The report says leasing activity was expected to increase as military contractors followed military workers to Fort Belvoir, but instead the contractors took space on the National Geospatial Agency campus at the base. Major government relocations in the area mean overall vacancy will be above 20 percent for the foreseeable future. The vacancy rate should start to slowly decline in 2014, according to the report.
The report concludes that 2014 should be stronger for the markets as economic conditions improve. Long-term prospects for the Rosslyn-Ballston corridor will be strong because of its proximity to Washington, Metro access and high-quality office space. Crystal City will face a longer recovery.