Shifts in retail and technology drove solid results in 2012 for local industrial and flex properties — those suitable for either industrial or office space use — and the trend continued in the first quarter.

Net absorption (the difference between space leased and space vacated) totaled 337,000 square feet in the first quarter, after totaling 3.1 million square feet for all of 2012.

Market conditions are still improving, albeit at a slower pace compared with past cycles. Growth may be slow during the first half of 2013, as tenants remain hesitant about leasing space because of uncertainty regarding the federal budget. Improvement should accelerate during the second half of 2013 with a more robust market in 2014.

D.C. outlook: Alternative uses on the horizon

The District’s small flex-industrial market experienced flat conditions during the first quarter of 2013, with zero absorption during the past three months and just 135,000 square feet during 2012. The vacancy rate (including sublet space) was 11.3 percent at the end of the first quarter, unchanged from year-end 2012.

Asking rents increased 1.2 percent in the District during the past three months, after increasing 3.9 percent during 2012.

The District’s flex-industrial market should experience improving conditions during the remainder of 2013. Although demand will remain light, we expect it will be enough to modestly lower the vacancy rate. As vacancy edges down, asking rents should rise 3 percent to 4 percent this year, as some flex-industrial buildings are converted to more valuable alternative uses.

Northern Virginia outlook: Gradual expansion

Northern Virginia’s market is promising. Net absorption totaled positive 204,000 square feet during the first quarter, compared to positive 1.1 million square feet during all of 2012, just under the 15-year average of 1.2 million square feet. The overall vacancy rate was 10.1 percent at the end of the first quarter, unchanged from three months prior.

Rents increased 0.9 percent during the first quarter, compared to increasing 2.9 percent in all of 2012, and we expect them to gradually gain traction.

There was 615,000 square feet of flex-industrial space under construction or renovation in Northern Virginia at in March, up from 173,000 square feet a year ago.

The Northern Virginia market should continue to progress this year, but tenants remain hesitant to lease space because of federal austerity. Long-term growth should accelerate near Dulles Airport with expanding cargo operations there.

Maryland outlook: Rents edging higher

Conditions improved in the suburban Maryland market, as net absorption totaled 133,000 square feet during the first quarter of 2013, compared to positive 1.9 million square feet in all of 2012. This compares to the 15-year annual absorption of 916,000 square feet annually.

The flex-industrial vacancy rate decreased to 10.2 percent at the end of the first quarter, from 10.4 percent at the end of 2012.

Asking rents rose 0.4 percent during the first quarter of 2013, after rising 3.3 percent during all of 2012. Suburban Maryland asking rents should continue to rise and we project the vacancy rate will decline during the balance of 2013.

Ricky Bierbower is an associate at Delta Associates. Staff at Delta Associates contributed to this article. For more information, please visit