After a sluggish start to 2016, total leasing activity in the Virginia suburbs rebounded in the second quarter, rising by 60.0% relative to the first quarter. The increase in leasing activity did not translate into meaningful net new growth as a significant portion of the region’s leasing volume continued to come in the form of lease renewals and early restructures. As a result, the region’s overall availability rate remained largely unchanged inching down by just 0.1 percentage point relative to the first quarter. Average asking rents posted a slight quarter-on-quarter increase but remain just slightly above the levels seen one year ago (0.5%). With nearly 36.0 million square feet of space available in Northern Virginia, leasing fundamentals remain extremely tenant favorable as landlords continue to offer generous concession packages in order to attract tenants.
Northern Virginia’s office leasing environment will remain tenant-friendly for the foreseeable future. Despite some signs of net new growth during the second quarter, availability remains elevated throughout much of the region. Asking rents are expected to increase slightly; however, effective rents will continue to decline as a result of the record-high concessions currently offered by landlords.
While Suburban Maryland has experienced moderate growth in 2016, tenant-favorable conditions are expected to persist for the near to mid-term. Prince George’s County, which only registered 54,500 SF in total leasing activity, is expected to continue to lag behind the rest of the region, putting upward pressure on availability and downward pressure on asking rents. Long-term, Suburban Maryland is likely to benefit from new, mixed-use development along the region’s planned Purple Line.