Yesterday with Nova NAIOP
Will Northern Virginia’s 18% office vacancy actually drop in 2015? It’s possible based on construction slowing down, said Avison Young research VP Margaret Donderbrook and principal Dave Millard, here with NAIOP Northern Virginia president Martha Marks, at the organization’s packed forecast lunch yesterday in Falls Church. Northern Virginia is home to 164M SF of office and industrial space, and rents averaging $32/SF. Only 400k SF will deliver in NOVA this year (3100 Clarendon Blvd), which is welcome news since more has been delivered than absorbed over the last decade.
We couldn’t break up this conversation between JLL’s Jim Herbert and WestDulles’ Eric Wells. But surely they were talking about how leasing has been down for 2014. Why? Renewals are on the rise, tenants are taking less space, and brokers are doing more deals well in advance. Rightsizing will continue in 2015, with some of the trend being driven by the federal government. GSA has 20M SF in NOVA, with 62% of leases expiring in the next five years. Margaret says GSA will be pushing to reduce its footprint by 5%. Even though the private sector will also be rightsizing, Margaret says the positive trend will be companies looking for newer, better located buildings.
We snapped Alexandria mayor Bill Euille and Peterson Cos principal Jon Peterson. The NOVA data center market is the envy of competitors like North Carolina, Northern California and Dallas. It’s home to 12M SF, with 9.5% vacancy. The market is now facing some potential legislative fights in the Virginia General Assembly with proposed legislation that would require data center operators to foot the bill for burying transmission lines underground. The industrial market is also doing well in NOVA with 9.5% vacancy and 86M SF. At least six industrial projects are under construction, with 80% pre-leased.
We also snapped NAIOP NOVA chairman and WestDulles president Mark Hassinger and Avison Young’s John McEvily. The 85 million Millennials can’t be ignored in any CRE forecast. They want to be mobile, in transit-oriented hubs and amenity-rich environments, and they’ll drive the future of office. They want less personal, and more shared space in the office. (Collective groan from the brokers in the room.) And that’s part of the reason submarkets like Rosslyn and Reston are posing some new competition in NOVA. Buildings near any Silver Line stop will also start getting more attention.