NORTHERN VIRGINIA 1Q11

YOUR CITY HERE INDUSTRIAL REPORT 1Q11

Overview
Through March, the nation’s unemployment rate stood at 8.8%, the lowest average since April 2009. Hiring momentum in the health care industry continued to trend up, as more than 280,000 jobs were added over the past twelve months. Manufacturing employment, specifically in durable goods, has risen by 243,000 since December 2009. However, local government continued to report job losses and has shed over 416,000 jobs since September 2008. In Northern Virginia, preliminary unemployment figures for the month of February are well under the national rate: Fairfax County at 4.6%, the City of Alexandria at 4.7%, Loudoun County at 4.4% and Prince William County at 5.6%. Arlington County is on track to deliver the lowest rate of 3.9%, compared to 4.8% at the same time last year.

Stagnant Leasing & Sales
Approximately 320,000 square feet (sf) of new leases were signed in the first quarter, and no properties traded hands to investors or users. Nearly half of new leasing activity took place in Fairfax County, with Springfield/I-95 leading the way and Route 28 South/Chantilly following behind. Construction is still halted, and only one project is slated to deliver this year: approximately 125,000 sf will be officially completed in the second quarter at 10231 Harry J. Parrish Boulevard in Manassas, which has yet to secure a tenant and has a triple net asking rent of $7.50 per square foot. No other projects are currently on the radar to break ground in the near future.

Outlook
The remainder of the year will look much like 2010 as it relates to vacancy rates and asking rents. Notable game-changers in the Northern Virginia commercial market, such as BRAC, HOT Lanes and the Metro extension, are progressing but have yet to come to fruition. The first phase of Metro construction is expected to wrap up by late 2013, and HOT Lanes are on track to be completed in 2012. BRAC relocations will continue, leaving behind pockets of vacant space in some cases. One positive point is that the federal government recently avoided a complete shutdown, which would have had drastic effects on many businesses in the area. Expect tenants to negotiate favorable deal terms over the next few quarters with little resistance from landlords. Nearly 7.0 million square feet (msf) of vacant space is available for lease out of an inventory of about 44.8 msf, and few tenants are in the market actively looking for large blocks of space.

Conditions Bottom Out
Market fundamentals in Northern Virginia changed little from the close of 2010. Direct and overall vacancy rates budged from 14.4% and 15.1% to 14.6% and 15.3%, respectively, as demand remained diminished and most tenants are seeking ways to prioritize space efficiency over growth initiatives. The average asking rental rate for direct product finished 2010 at $9.91 per square foot (psf), and held steady through early 2011 at $9.91 psf. Rents are not expected to fluctuate measurably through the duration of the year; however, 2012 should show signs of improvement and thus give landlords the ability to start getting more aggressive while establishing rental rates at their properties.

Stats on the Go
1Q10 1Q11 Y-o-Y Change 12 month Forecast

Construction Completions

Overall Rental vs. Vacancy Rates
Rental Rate Vacancy Rate

2.0 $12.00 1.5 $10.00 $8.00
18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

Overall Vacancy Direct Asking Rents YTD Leasing Activity (sf)

15.2%

15.3%

0.1 pp

  

1.0

$10.21

$9.90

-3.0%

$6.00 $4.00 $2.00

0.5 323,897 319,944 -1.2%

0.0 2007 2008 2009 2010 1Q11

$0.00 2007 2008 2009 2010 1Q11

NORTHERN VIRGINIA INDUSTRIAL REPORT 1Q11

Market/Submarket Statistics
Submarke t Springfield/I-95 Route 28 South Route 28 North Manassas Fle x Springfield/I-95 Route 28 South Route 28 North Manassas Ware house /Distribution Inve ntory 6,143,036 5,743,403 6,329,804 861,186 19,077,429 11,770,052 3,766,977 8,027,528 2,112,948 25,677,505 O ve rall Vacancy Rate 15.8% 17.1% 17.7% 34.3% 17.6% 12.0% 14.3% 16.3% 11.5% 13.6% YTD Le asing Activity 54,000 25,000 32,402 0 111,402 55,739 15,788 137,015 0 208,542 YTD Use r Sale s Activity 0 0 0 0 0 0 0 0 0 0 Unde r Construction 0 0 0 0 0 0 0 0 124,800 124,800 YTD YTD Construction Dire ct Ne t Comple tions Absorption 0 0 0 0 0 0 0 0 0 0 (47,080) 10,670 62,545 (7,919) 18,216 (11,849) 151,240 (168,038) 2,747 (25,900) YTD O ve rall Ne t Absorption (47,080) 32,421 65,045 (7,919) 42,467 14,947 151,240 (346,811) 2,747 (177,877) Dire ct We ighte d Ave rage Ne t Re ntal Rate *
HT MF OS W/ D

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

$13.58 $11.85 $9.57 $11.41 $11.64 N/A N/A N/A N/A N/A

N/A N/A N/A N/A N/A $8.74 $7.67 $8.21 $7.69 $8.31 OS/WD

Springfield/I-95 Route 28 South Route 28 North Manassas Total

17,913,088 9,510,380 14,357,332 2,974,134 44,754,934

13.3% 16.0% 16.9% 18.1% 15.3%

109,739 40,788 169,417 0 319,944**

0 0 0 0 0

0 0 0 124,800 124,800

0 0 0 0 0

(58,929) 161,910 (105,493) (5,172) (7,684)

(32,133) 183,661 (281,766) (5,172) (135,410)

N/A N/A N/A N/A N/A

N/A N/A N/A N/A N/A

N/A N/A N/A N/A N/A

$10.75 $10.21 $8.82 $9.60 $9.90

* Rental rates reflect asking $psf/year. **Revised after the close of statistics.

HT = High T ech MF=Manufacturing OS = Office Service W/D = Warehouse/Distribution

Market Highlights
SIGNIFICANT 1Q11 LEASE TRANSACTIONS
BUILDING
22630 Dulles Summit Court 10400 Furnace Road 22695 Commerce Center Court 6636-6672 Fleet Drive

MARKET
Route 28 Corridor North Springfield/I-95 Route 28 Corridor North Springfield/I-95

TENANT
Amazon Undisclosed Turner Associates Worldpac, Inc.

SQUARE FEET
137,015 54,000 32,402 30,000

PROPERTY TYPE
Warehouse/Distribution Flex Flex Warehouse/Distribution

SIGNIFICANT 1Q11 SALE TRANSACTIONS
BUILDING
N/A

MARKET

BUYER

SQUARE FEET

PURCHASE PRICE

SIGNIFICANT 1Q11 CONSTRUCTION COMPLETIONS
BUILDING
N/A

MARKET

MAJOR TENANT

SQUARE FEET

COMPLETION DATE

SIGNIFICANT PROJECTS UNDER CONSTRUCTION/RENOVATION
BUILDING
10231 Harry J. Parrish Boulevard

MARKET
M anassas

MAJOR TENANT
N/A

SQUARE FEET
124,800

COMPLETION DATE
2Q11

Cushman & Wakefield of Virginia, Inc. 1600 Tysons Boulevard, Suite 400, McLean, VA, 22102 (703) 448-1200

www.cushmanwakefield.com

* The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. © 2011 Cushman & Wakefield, Inc. All rights reserved.

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