Office tenants in Northern Virginia are starting to realize that the low rents they are enjoying now might not last.
Companies increasingly are renegotiating leases to take advantage of the low rents, thinking that within a year the market will rebound and asking rents will increase.
“People are starting to realize that the [market] has started to improve,” said Brad Davis, a senior vice president with broker CB Richard Ellis in Tyson’s Corner. “Definitely, now is the time to act upon that. If they don’t start to act soon, the window’s going to close on them.”
Mr. Davis recently helped construction firm Parsons Brinckerhoff renegotiate its lease at Spring Park Place in Herndon, locking in low rent rates through 2012. And, because the company had signed its previous lease before rent rates fell, the company is immediately saving 30 percent to 40 percent per month. Precise figures for the lease were not disclosed.
Mr. Davis said it also is a good deal for Parson’s landlord, CALEAST Industrial Investors, because they won’t have to look for a new tenant in 2007, as the original lease indicated.
Office vacancy rates in Northern Virginia shot up in 2001 and 2002 after the collapse of the technology sector caused many businesses there to close doors or downsize dramatically. As a result, landlords dropped rent rates, from an average of $30 per square foot per year in 2000 to less than $25 in 2002. In the far-out submarkets of Herndon, Reston and Chantilly, rent rates were among the lowest in the nation.
But the average asking lease rate in Northern Virginia rose in 2003 for the first time in three years, and tenants filled more than 5 million square feet in the market. In addition, there is virtually no new construction in Northern Virginia, which is expected to allow tenant demand catch up with the supply of space. Analysts said a recovery could be in store in six to 18 months.
In other news…
A federal bill that would turn the annex of the Old Post Office on Pennsylvania Avenue NW into a national women’s history museum was referred this week to the Senate Commerce, Science and Transportation Committee. If approved by the committee, the bill could pave the way for the creation of the museum by next year. But it is not clear whether museum officials have the support from the real-estate community, which wants more retail or office space at the site, rather than a nonprofit organization.
Spaulding and Slye Colliers helped negotiate leases for two new tenants at the Air Rights Center in Bethesda. ABT Associates Inc., a government and business research and consulting firm, will occupy 30,000 square feet. The Department of Health and Human Services will fill 15,000 square feet.
Blake Real Estate announced that it completed six leases totaling about 50,000 square feet at 1425 K St. NW. New tenants will include 3M, Caterpillar and the Mortgage Insurance Companies of America.
Optical networking company AboveNet signed a 7-year lease for 15,325 square feet at 13861 Sunrise Valley Drive in Herndon. Transwestern Commercial Services helped broker the lease between AboveNet and landlord ASLAN Realty.
Property Lines runs Fridays. Tim Lemke can be reached at firstname.lastname@example.org or 202/636-4836.
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