Q3 2020 Northern Virginia Market Report
The effects of COVID-19, though not as significant last quarter, considerably accelerated during the third quarter of 2020. Leasing activity continued to slow, with total leased square feet dropping nearly 70% from year-ago levels. Activity and demand fell across all office classes, a trend that is expected to continue through the end of 2020 and well into 2021. No Northern Virginia buildings were delivered in the third quarter, though construction for larger projects, such as Amazon’s HQ2, continue on schedule. Building construction does continue, although developers have more trepidation with the uncertainty in the market, pushing back construction delivery dates and repositioning proposed projects. Much of Northern Virginia’s office market continues to remain structurally oversupplied, evidenced by the region’s high vacancy rate. Average direct rental rates fell $0.15/SF from Q2 to Q3. The widespread decline of asking rents in a significant number of submarkets suggests landlords are conscious of the slow-down in demand and are proposing very aggressive concession packages of free rent, improvement allowances, and taking over existing lease obligations.