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Defense Leasing Remains Strong in Northern Virginia
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"Money was needed for the war effort to keep the troops supplied and to get the troops there," Hutchens said. "All of a sudden the budget got very tight."
Still, war-related Defense Department contracts continued to flow to private companies, particularly ones with a major presence in Northern Virginia. In fiscal 2005, Lockheed Martin landed $19.4 billion in Defense Department contracts, Northrop Grumman got $13.5 billion, Halliburton got $5.8 billion, Booz Allen Hamilton got a $1.2 billion, and the Washington Group International got $879 million, according to the department.
The result, says John F. Sikaitis, research manager for Jones Lang LaSalle, is that 60 to 70 percent of the large commercial office leases in recent years in Northern Virginia have gone to government contractors.
"The Northern Virginia activity has largely been directed by the war on terrorism, counterintelligence and the Iraq war," Sikaitis said.
Real estate experts don't think the market has too much to fear from an end to major operations in Iraq.
"You're not going to see a huge drop-off," he said. "Even if the war comes to an end, you're not going to see record levels of decline in defense spending. You need to see the military build up again in terms of equipment and new technology."
Commercial real estate experts say they expect defense contractors to continue to take on more office space, but not at the same frenetic pace that was seen shortly after the Sept. 11 attacks.
"Those rates of growth are unsustainable," Mansinne of Jones Lang LaSalle said, adding that the Northern Virginia office market is likely to remain the biggest beneficiary of the government spending.
"That's where the affordable office space is, that's where space exists, and that's where employees live," he said.
Allan Lengel covers commercial real estate. His e-mail address islengela@washpost.com.
