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NorthernVA IND 3Q11
NorthernVA IND 3Q11
Overview
According to the Federal Reserve Bank of Richmond, the Northern Virginia unemployment rate rose slightly since July, up 0.2 percentage points to 4.8%. Despite the increase, it is still 0.3 percentage points lower than this time last year. In Virginia, information services have taken the biggest hit, contracting by 6.4% since July and nearly 10% from the third quarter of 2010. Despite poor job performance in the third quarter, with the national unemployment rate at 9.1%, Northern Virginia continues to be a favorable region. Manufacturing employment in the Northern Virginia region also continued its decline, dropping another 0.5 percentage points from last quarter. Despite this downward trend, manufacturing output actually increased by 0.8 percentage points from last quarter but still remains down 1.6 percentage points from where it was this time last year.
Outlook
BRAC related movements could help boost the flex and industrial market in Northern Virginia. The FBI is poised to take occupancy at Mission Ridge in early 2012 which should bring several new government contractors to the Route 28 region. Springfield also stands to benefit from the BRAC movements with large tenants such as the National Geospatial Intelligence Agency (NGA) moving into the area. Additionally, the extension of the Silver Line will also help advance this region as the new infrastructure combined with the proximity to Dulles Airport provides ideal market conditions for manufacturers and suppliers. The construction pipeline seems to have life after all. Two new buildings broke ground at the end of the quarter at the Gateway Distribution Center. The two ProLogis buildings, with a combined 171,197 sf of spec warehouse/distribution space, signify that perhaps the market is getting ready for increased demand. Additionally, two projects are set to deliver in the fourth quarter. CGRs Dulles Trade Center II is poised to deliver 49,776 sf of warehouse speculative space to the Route 28 North submarket at the end of October, and the New Boston Funds 178,178 sf build-to-suit project for Rockwell Collins should be completed sometime this November.
Statistical Overview
Overall vacancy declined in the third quarter, continuing its trend from previous quarters. Although the change was less than half a percentage point, the total overall vacancy is down 0.8 percentage points from the same time last year. Third quarter absorption was lower than last quarter, but remained positive. Additionally, at 254,947 square feet (sf), year-to-date overall net absorption has vastly improved over the negative 465,757 sf it was after the third quarter in 2010. The average direct net rental rate continued to creep up this quarter, ending at $10.07 per square foot (psf), $0.30 psf greater than third quarter 2010. The average net rent in the office services sector declined slightly from last quarter, down $0.06 psf, but is still $0.33 psf higher than this time last year. The minor fall was not enough to cause the overall industrial rents to drop. The warehouse/distribution average net rental rate rose $0.14 psf from last quarter as rents are at their highest level since the first quarter of 2010.
Stats on the Go
3Q10 3Q11 Y-o-Y Change 12 month Forecast
17.5
14.6%
14.7%
0.1pp
14.0
$9.77
$10.07
3.1%
msf
$10 .0 0 $5 .0 0
1,194,498 834,557
-30.1%
Market/Submarket Statistics
Submarke t Springfield/ I-95 Route 28 South Route 28 North Manassas Fle x Springfield/ I-95 Route 28 South Route 28 North Manassas Ware house /Distribution Inve ntory 6,143,036 5,743,403 6,329,804 861,168 19,077,429 11,770,052 3,766,977 8,027,528 2,237,748 25,802,305 O ve rall Vacancy Rate 13.7% 16.3% 16.3% 32.5% 16.2% 13.3% 13.0% 14.3% 14.1% 13.7% YTD Le asing Activity 131,632 173,912 47,402 0 352,946 118,525 104,168 258,918 0 481,611 YTD Use r Sale s Activity 0 0 0 0 0 0 0 0 0 0 Unde r Construction 0 0 178,178 0 0 0 0 220,957 0 0 YTD YTD Construction Dire ct Ne t Comple tions Absorption 0 0 0 0 0 0 0 0 124,800 124,800 33,085 55,549 87,004 7,079 182,717 (101,063) 199,948 (42,286) 44,787 101,386 YTD O ve rall Ne t Absorption 39,383 76,278 89,504 7,079 212,244 (55,240) 199,124 (145,968) 44,757 42,703 Dire ct We ighte d Ave rage Ne t Re ntal Rate *
HT MF OS W/ D
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
N/A N/A N/A N/A N/A $8.95 $8.02 $8.16 $7.58 $8.46 O S/WD
N/A $11.10 N/A $11.79 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
0 0 0 0 0
0 0 399,135 0 399,135
0 0 0 124,800 124,800
N/A $10.07
Market Highlights
SIGNIFICANT 3Q11 LEASE TRANSACTIONS
BUILDING
430-440 South Pickett St* 6308 Gravel Ave* 13870-13912 Park Center Rd* 6009 Farrington Ave
SUBMARKET
Springfield/I-95 Springfield/I-95 Route 28 South Springfield/I-95
TENANT
Target Corporation
SQUARE FEET
26,140 26,030 24,242 20,301
PROPERTY TYPE
Warehouse/Distribution Warehouse/Distribution Warehouse/Distribution Warehouse/Distribution
Beltway M overs Associates, Inc. Total Truck Transport Autocraft Body and Paint, Inc.
SUBMARKET
N/A Springfield/I-95
BUYER
Area Property & Alder Realty GKE LLC
SQUARE FEET
1,169,675 20,000
PURCHASE PRICE
$148,700,000 $3,300,000
SUBMARKET
MAJOR TENANT
SQUARE FEET
COMPLETION DATE
Cushman & Wakefield of Virginia 1600 Tysons Boulevard, 4th Floor, McLean, VA 22102 (703) 448-1200
www.cushmanwakefield.com
* The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2011 Cushman & Wakefield, Inc. All rights reserved.