If you’re looking for a big block of office space this year, two areas expected to offer plenty of options are the I-395 Corridor and Crystal City areas. Office vacancy in both areas is expected to rise as several key tenants reach the end of their leases and are scheduled to relocate.
Most of this newly available space is the result of timing and lease expiration cycles as both markets fared well during the recession and did not see the spike in vacancy that many other markets experienced. Another major factor is the pending relocation of several government tenants to the newly built BRAC center or to other government buildings.
As a result of these moves, about one-quarter of the office space in both market areas is available and being marketed for lease. That number is disproportionately high compared with the Washington market average of 14 percent.
During 2011, vacancy rates along the I-395 Corridor jumped from 11.4 percent to 18 percent by year end. The vacancy rate is expected to rise further following the departure of several key tenants. Currently, building owners are marketing 27 percent of the total office space in this submarket as available for lease.
Despite that large amount of available space, asking rental rates have actually increased as formerly unavailable prime office space hit the market. The average asking rental rate per square foot increased from $27.73 to $31.90 over the period. One of the key tenants moving out is the U.S. Army Test and Evaluation Command vacating 4501 Ford Ave in Alexandria.
The story is slightly different in Crystal City. While office vacancies were relatively stable in 2011, hovering just under 10 percent, current data indicate that office vacancies could rise sharply to above 15 percent by the end of March if several major tenants move out as expected. About a quarter of the office space is being marketed for lease.
Compared to the I-395 Corridor, asking rental rates have remained stable at around $39.52 a square foot. Major tenants expected to move out include Boeing, which will be leaving about 117,000 square feet at 2451 Crystal Dr. in Arlington.
The good news is that these moves are creating a lot of supply for aspiring tenants to choose from with multiple buildings offering large amounts of space and full floors available.
Dameon Makinde is a research manager at CoStar Group in Washington.
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