The Washington, DC metropolitan area’s economic makeup continues to be the envy of most major markets in the country. It boasts one of the lowest unemployment rates, the most well-educated workforce and highest median incomes in the nation. The one point of concern in the region is the federal government, which comprises about a third of the region’s gross regional product. The effects of federal budget austerity and across the board spending cuts - known as sequestration - took their toll on the region’s economy in 2014, slowing overall job growth and causing a loss of about 12,000 office-using jobs in the region. The job stats at the end of the first quarter of 2015 are certainly heading in a more positive direction with 49,000 total nonfarm jobs over the year in March.
The region’s industrial markets have benefitted from private sector demand, which helped fuel positive net absorption of 41,700 square feet (sf) in flex space and 7,100 sf in warehouse inventory for the first quarter. Warehouse space, which accounts for nearly 60% of the area’s industrial market, has experienced dropping vacancy rates over the last five years and has far exceeded historical vacancy rates of 10.3% at 8.31%. SYNNEX Corporation, a Fortune 500 information technology supply chain services company, signed the largest deal in Northern Virginia’s Industrial market. They signed a renewal for 78,900 sf at 3900 Stonecroft Boulevard. Facebook was also among the largest new deals in the market as they took 25,800 sf at 21625 Gresham Drive. With their proximity to Washington Dulles International Airport, Route 28 North and South submarkets were major drivers in demand and accounted for four of the top five transactions in the market.
Loudoun County has seen the most recent activity with 114,000 sf of absorption for warehouse and 4,200 sf for flex space in the first quarter. The submarket has the lowest vacancy rate for both warehouse and flex product at 6.4% and 11.9%, respectively. Rents for Northern Virginia Flex and Warehouse space came in at $10.82 on a triple net basis with Alexandria/Arlington holding the top asking rents at $17.14 for flex and $9.78 for warehouse space.
By: Nathan Edwards
Director of Research, DTZ - Washington, D.C.
Email Nathan: Nathan.Edwards@dtz.com
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