In Rosslyn-Ballston, there’s more office vacancy than demand

February 23, 2014

For contrasting the pre- and post-recession performance of a local office market, it’s hard to top the Rosslyn-Ballston corridor, which runs above Metro’s Orange line stretching from Rosslyn through Clarendon, Virginia Square and Ballston along the south side of Route 66 in Arlington County.

After enjoying several years of healthy leasing activity and single-digit vacancy rates that attracted developers in droves, the office market in this mixed-use enclave has taken its lumps since the recession.

Several large tenant move-outs have hit the corridor especially hard. The U.S. Army Corps of Engineers vacated 250,000 square feet in Rosslyn to relocate to the Pentagon in 2012, and the National Science Foundation recently announced plans to move its headquarters out of 667,000 square feet in Ballston to Alexandria in 2017. As a result of these and other tenant moves, the corridor has seen more space vacated than leased for the past three years.

The post-recession drop in demand occurred after a period of intensive development along the Rosslyn-Ballston corridor. More than 3 million square feet of office space was added from 2004 to 2008. After no space was added in 2009, the arrival of new buildings resumed in 2010, culminating in topping off late last year of 1812 N. Moore Street, the area’s tallest building at 35 stories. The massive office tower took nearly three years to build and measures 535,381 square feet and presently is vacant.

While office vacancy rates for the rest of the Washington office market started to stabilize in 2010, the Rosslyn-Ballston corridor vacancy rate has shot up from 7.7 percent just after the recession in 2010 to 19.2 percent today, in part because of the addition of more than 500,000 square feet of vacant space at 1812 N. Moore St.

Despite its recent growing pains, the corridor may finally be on the mend. A large tenant that could take up as much as 200,000 square feet is reported to be interested in the 1812 N. Moore office tower, and the JBG Cos. just broke ground on a 31-story, 377-unit luxury apartment project on the same block. The Federal Deposit Insurance Corp. plans to move into 171,000 square feet this May at 3701 N. Fairfax Drive in Virginia Square, and CNA Corp. is taking most of the 210,000-square-foot office building currently under construction at 3001 Washington Blvd. in the Clarendon/Courthouse area.

By 2018, office vacancy in the Rosslyn-Ballston corridor is projected to drop by as much as 400 basis points, but the construction pipeline isn’t expected to return to historical averages for this area until much of the existing space on the market is leased.

For now, office tenants can have their pick of high-quality space within an amenity-packed area that offers unsurpassed Metro access.

DJ O’Brien is a research manager for CoStar Group in the District.

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