NoVa office space market improves after pandemic disruption
Net occupancy loss decelerated in third quarter
The Northern Virginia office real estate market showed improvement in leasing activity and occupancy loss in the third quarter, following four quarters of disrupted activity, according to a report released by commercial real estate services and investment firm CBRE Group Inc. this week.
Gross leasing activity held steady from the second quarter, ending the third at 2.1 million square feet. Although the square footage is down 22% from the 2018 to 2019 quarterly average, it is an improvement from the average leasing volume of 1.7 million square feet in the second half of 2020 and first quarter of 2021.
Net occupancy loss decelerated. The third quarter had 47,000 square feet of negative absorption, but the prior four quarters returned a combined 2.5 million square feet to the market, which was the largest occupancy loss over a 12-month period that the market has recorded since 2012, according to the report.
The overall vacancy rate, however, rose to 20.6%. The market’s peak vacancy level was 20.9% in the first quarter of 2018.
Amazon.com Inc. leased an additional 167,000 square feet in National Landing, which brought its total leased footprint to just over 1 million square feet. CACI International Inc.’s return of 100,000 square feet in the Ballston neighborhood in Arlington offset the gain, though.
Development and construction group Skanska broke ground at 3901 N. Fairfax Drive in the third quarter for a planned 201,000 square foot office development, of which 10,000 square feet will be retail space. The building is slated for completion in mid-2023.
Across the Northern Virginia market, five buildings totaling 1.9 million square feet are currently under construction at a 61% prelease rate.