Q2 2012 Suburban Virginia, Virginia Industrial Submarket Trends

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Q2 2012 Suburban Virginia, Virginia Industrial Submarket Trends

The Northern Virginia market is notable for the large-scale demand for Flex/R&D space generated by a broad-based high-tech business base serving both commercial and defense demands. Included is a major data center space sector (one of the nation’s largest). Generally speaking, the Route 28 Corridor in Loudoun and western Fairfax County serve as chief hosts to this segment of the market. Warehouse/distribution space is more broadly distributed, with two airports as the anchors.

Airport North

  • Reis’ Airport North submarket covers Sterling and Ashburn and other areas of Loudoun County north of Dulles International Airport. The region, bisected by Route 28 (Sully Road) is commonly referred to as the Route 28 North submarket.
  • For the Airport North submarket, Reis reports a second quarter vacancy rate of 15.0% for 4.3 million square feet of Flex/R&D space, down from 15.3% one quarter and one year earlier. For 4.8 million square feet of warehouse/distribution space, Reis reports a second quarter vacancy rate of 6.4%, down 20 basis points for the quarter and down 120 for the year.
  • Reis reports second quarter average asking and effective rents of $7.90 psf and $7.30 psf for warehouse/distribution space, down 0.6% and 0.4%, respectively, over the quarter and down 3.5% and 3.9% year-over-year. For Flex/R&D space in Airport North, Reis reports average asking and effective rents of $10.83 psf and $9.81 psf, up 0.3% and 0.7% over the quarter, but down 1.8% and 1.4% year-over-year.
  • For Route 28 North, Cushman & Wakefield report overall vacancy at 14.8% and for Flex space 15.3% for warehouse/distribution. Respective direct weighted rental rates are $10.51 psf and $8.18 psf.
  • Looking forward, Reis forecasts the warehouse/distribution vacancy rate to fall to 6.3% by year-end. For Flex/R&D, the rate is forecast to finish 2012 at 15.1%, with only minimal rent gains.

Airport South/Western Fairfax County; Herndon-Reston; Chantilly

  • Reis’ Airport South submarket includes areas of Loudoun County as well as areas of western Fairfax County (an area often referred to as Route 28 South, which includes Chantilly). In the recent period, the tech-oriented Airport South market has lingered in the shadows of its more vibrant neighbor to the north.
  • Second quarter vacancy here is 16.0% for warehouse/distribution space, down 340 basis points year-over-year and down 60 basis points for the quarter. For Flex/R&D space, vacancy is 18.0% in the second quarter, up 10 basis points for the quarter but down 300 year-over-year.
  • For warehouse/distribution space, average asking and effective rents are reported at $8.09 psf and $7.51 psf, up 1.9% and 2.3% for the quarter and up 1.5% and 3.2% for the year. For Flex/R&D space, asking and effective rents are reported at $9.88 psf and $8.87 psf, down 0.3% and 0.1% for the quarter and 1.5% and 0.3% for the year.
  • Reis reports second quarter 2012 warehouse/distribution space net absorption in the Airport South submarket at positive 26,000 square feet. The first quarter total was plus 32,000 square feet. Net absorption in the Flex/R&D sector for second quarter 2012 was negative 4,000 square feet, although first quarter was positive 106,000.
  • For it Route 28 South Submarket, Cushman & Wakefield reported overall vacancy rates of 16.5% and 10.5% for Flex and warehouse/distribution space. Respective direct weighted rental rates are reported at $12.13 psf and $8.06 psf.

Close-in/Springfield/I-95

  • For 4.2 million square feet of warehouse/distribution space, Reis reports second quarter vacancy in its Springfield/I-95 submarket at 7.7%, down 60 basis points from the quarter and down 350 from one year earlier. Reis reports average asking and effective rents of $9.07 psf and $8.40 psf, down 2.6% and 1.6% year-over-year. Asking rents were unchanged and effective rents increased 0.4% over the quarter.
  • For 5.1 million square feet of Flex/R&D space, Reis reports second quarter vacancy at 20.9%, down from 23.0% one year earlier and down 20 basis points for the quarter. This is the highest rate Reis records among the major submarkets. Average asking and effective rents are $13.53 psf and $12.10 psf., up 0.2% and 0.3% for the quarter but down 0.9% and unchanged, respectively, year-over-year.
  • In its Springfield/I-95 submarket, Cushman & Wakefield reports an overall vacancy rate of 11.8% for Flex space and 14.6% for warehouse/distribution, and a direct weighted average rent of $13.49 psf for Flex and $8.85 psf for warehouse/distribution space.
  • For its overall Fairfax County submarket, Cushman & Wakefield reports a vacancy rate of 13.8%, with 14.0% reported for Flex and 13.6% reported for warehouse/distribution. This source reports a direct weighted average rent of $12.80 psf for Flex space and $8.70 psf for warehouse/industrial, for a total rent of $10.36 psf.

Manassas-Prince William County

  • A stock of developable land and growth in biotechnology industries have been significant factors in drawing both new development and high expectations to Prince William County. The expectations held for biotech have centered on the 1,600-acre, county-owned Innovation @ Prince William Technology Park business park in Manassas.
  • For its Manassas/Prince William County submarket, Reis reports warehouse/distribution vacancy at 4.3%, down 90 basis points for the quarter and down 320 for the year. Average asking and effective rents are reported at $6.89 psf and $6.46 psf, up 0.4% and 1.1% for the quarter and up 0.4% and 2.7%, respectively, for the year.
  • For Flex/R&D space, Reis reports vacancy at 17.6%, down 70 basis points over the quarter and 420 year-over-year. Average asking and effective rents are reported at $11.00 psf and $9.97 psf, unchanged and up 0.5% over the quarter, and down 0.9% and up 0.4% year-over-year.
  • For Manassas, Cushman & Wakefield reports Flex vacancy at 36.7% and warehouse/distribution vacancy at 9.8%. Direct weighted rents for these property types are reported at $11.24 psf and $8.05 psf.