Q3 2021 Northern Virginia Market Report

Confidence in the Northern Virginia office market was boosted by renewals of more than 500,000 square feet for several government and defense contractors. While renewals do not push absorption numbers, attention is drawn to an increase in return-to-office trends driven mostly by large tenants. Loudoun County, the Rosslyn-Ballston Corridor and Alexandria, all managed to record positive absorption this third quarter. Fairfax County, the largest in Northern Virginia, is still struggling with negative absorption numbers mostly driven by Tysons Corner, which has close to 5 million square feet of vacancy. With landlords reluctant to reduce rental rates and opting to increase concessions to retain and attract new tenants, average direct rental rates are edging upwards, increasing $0.80/SF year-over-year to $34.02/SF at the end of the third quarter. Vacancy rates are likely to continue feeling upward pressure to end the year as Skanska’s 3901 N Fairfax Drive in Ballston will break ground with no announced preleases.