- The Washington Times - Thursday, September 11, 2003

Northern Virginia’s office market finally showed some signs of life in the second quarter this year, as tenants began to lease more space for the first time in over two years.

The office vacancy rate in Northern Virginia fell from 17.8 percent to 16.7 percent during the quarter, and the amount of space filled during the quarter increased by 1.6 million square feet, according to Cassidy and Pinkard, a local real estate services firm.

Led by more than 700,000 square feet in leases by the federal government, Northern Virginia saw its first increase in 27 months in space filled. The Army leased 525,000 square feet at the Zachary Taylor Building in Crystal City, and the General Services Administration leased 84,700 square feet at MetroPlace 3 in Vienna on behalf of the Department of Homeland Security. The GSA also leased 60,000 square feet at Corporate Oaks I in Reston, on behalf of the Department of the Interior.

The drop in vacancies means that the demand for space is finally catching up to the rate of new construction. Northern Virginia was particularly hard hit after the collapse of the technology sector, which left scores of new buildings empty.

Landlords aren’t doing flips over the state of Northern Virginia’s office market just yet. Many new tenants only chose the area during the quarter because of ultralow rent rates and incentives such as free rent and parking.

The average asking rent in the region is about $25 per square foot per year, or $10 less than in the District and $5 less than two years ago. Some space has leased for less than $15 per square foot per year. Many tenants are still shying away from some of the top-quality space, and some of the “new leases” during the quarter were nothing more than moves to consolidate several offices into one.

“The rates have really dropped,” said Mary Peterson, senior vice president with Cassidy and Pinkard. “The deals are really ugly.”

But at least there are deals — often with stable, credit-worthy tenants. In addition to the deals with the Army and the GSA, defense contractor Titan Systems leased 280,000 square feet at Two Freedom Square in Reston and KEI Pearson, a technology provider to the government, leased 88,000 square feet at 4250 North Fairfax Drive in Ballston.

In other news…

• Athena Technologies Inc., a maker of advanced flight control systems, moved headquarters from the Manassas airport to Vint Hill, a mixed-use development located between Gainesville and Warrenton in Fauqier County, Va. The company will occupy two buildings totaling 13,500 square feet.

• Nationally syndicated news show “Inside Edition” partnered with Lowe’s Home Improvement Warehouse to renovate the exterior of houses on a historic block of Anacostia in the District. Teams of workers from both groups Wednesday began painting facades and performing landscaping work on homes on Italianate Row at 13th and W streets SE.

• Spaulding and Slye Colliers announced that it has negotiated leases and lease renewals for 11 companies filling nearly 30,000 square feet at the Air Rights Center in Bethesda.

Property Lines runs Fridays. Tim Lemke can be reached at [email protected] or 202/636-4836.



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