- The Washington Times - Wednesday, December 27, 2006

The Northern Virginia office rental market, which seemed impervious to downturns only a few months ago, is showing signs of weakness.

“Based on our preliminary year-end data, it’s true,” said Sandy Paul, national research director for Delta Associates, an Alexandria commercial real estate information firm. “It has been slowing down.”

Northern Virginia office vacancy rates have risen to 9.1 percent as 2006 comes to a close, compared with 8.9 percent a year ago, Delta Associates reports.

The slip, far from a crisis, is merely a shift in the region’s economic fortunes, Mr. Paul said.

“It’s still under 10 percent, which is considered a healthy condition,” he said.

To a certain extent, the drop in commercial tenants for Northern Virginia reflects a change in the government’s defense spending, he said.

“Mostly that has to do with the descending rate of procurement spending,” Mr. Paul said. “Procurement spending by the federal government makes up a significant part of the Northern Virginia economy. As the spending slows, the demand for office space slows.”

In addition, some tenants have been redesigning their offices to pack more people into the same space and save on rent.

“They’re putting in fewer private offices and fewer cubicles and instead going with a more open floor plan,” Mr. Paul said.

Dale Powell, managing director of commercial real estate firm Cassidy and Pinkard, said the Northern Virginia office market still packs plenty of punch.

“I think it remains healthy,” he said.

Vacancies are up because many buildings completed this year have not been filled with paying tenants.

“We had a lot of groundbreaking that delivered this year, maybe a half million more square feet delivered in ‘06 compared with ‘05,” Mr. Powell said.

In other news …

• Giant Food LLC says it is nearly ready to make a leap beyond the grocery and pharmacy business with its plans to redevelop its store at 3336 Wisconsin Ave. NW.

The company is seeking approval from residents of the McLean Gardens community in public meetings for a project that would include residential and office space. Some of the retail space Giant plans to build would be unrelated to groceries.

“This is a totally different kind of project than what we’ve done before,” said Barry Scher, Giant Food spokesman.

The project would cover about one square block, part of which would require taking over the space of an abandoned G.C. Murphy Co. store.

A new grocery and pharmacy would be built at the same address with nearly five times more sales space than the 11,000-square-foot store that has been there since 1953.

“The current store is the second oldest store in the chain,” Mr. Scher said.

Giant also proposes building 11 town houses, about 55,000 square feet of retail space as well as offices and 34 residential units above the retail strip.

“The property is so large that we can make use of it for things other than retail,” Mr. Scher said.

Although Giant has been discussing the project for years, only now are the last procedural hurdles of public and regulatory approvals being finalized. Construction would begin in about two years.

Property Lines runs on Thursdays. Call Tom Ramstack at 202/636-3180 or e-mail [email protected]

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