Metropolitan DC Market Overview 2Q 2014

Overall Market Summary

The Washington, DC Metropolitan commercial real estate market is comprised of approximately 410.4 million square feet of

rentable office space located in the District of Columbia, Northern Virginia, and Suburban Maryland. The total vacancy rate in-

creased to 15.4%, up from 15.2% at the end of the previous quarter. The market recorded approximately 14,000 square feet of

net absorption in the second quarter, a substantial improvement from the -1.1 million square feet absorbed in the first quarter.

Seven buildings completed construction in the first quarter (1 DC, 4 VA, 2 MD), totaling 2.0 million square feet and 73% leased.

Leasing activity remained relatively flat with 5.3 million square feet in transactions signed during the second quarter. The largest

lease executed in the quarter was a renewal signed by law firm Hogan Lovells for 384,650 square feet in Washington, DC. There

were twenty-four sale transactions in the second quarter, comprising of 3.5 million rentable square feet and totaling $1.1 billion

(a 45% drop from the $2.0 billion that sold in the previous quarter). Average asking rental rates ticked down $0.04 to $35.45 per

square foot, Full Service. From May 2013 to May 2014 employment in the DC Metropolitan area had a net increase of 6,000 jobs

(9,800 private sector, -3,800 government) representing 0.2% growth, while unemployment decreased to 5.0%.

Metropolitan DC Market Overview 2Q 2014

101 Constitution Avenue | Suite 325 East | Washington, DC | 20001 | 202.513.6700

1530 Wilson Boulevard | Suite 200 | Arlington, VA | 22209 | 703.522.4600

National Presence. Local Focus

Direct Vacancy Total Vacancy Total Net Absorption Leasing Activity

DC 10.6% 11.2% -85,379 SF 4.1 M SF

VA 15.2% 16.2% -228,090 SF 3.8 M SF

MD 16.4% 17.2% -754,973 SF 2.6 M SF

Metro Area 14.6% 15.4% -1.1 M SF 10.5 M SF

Outlook

As low employment growth continues to stymie the Washington, DC metro area, the commercial real estate market is expected

to remain relatively flat through the remainder of 2014. The private sector should continue to drive employment; while the federal

government continues to downsize its workforce. Early renewals are expected to dominate the larger lease transactions, as pri-

vate sector tenants leverage the current market conditions; while the GSA continues to execute short-term renewals. To maintain

or increase competitiveness in this “tenant’s market”, aggressive landlords will continue to renovate and upgrade amenities

to their buildings. While the market recorded positive absorption in the second quarter, absorption is expected to return to the

negative as government agencies and private sector tenants continue to consolidate and strive for maximum space efficiency.

Vacancy is expected to increase due to these factors, and through the delivery of moderately pre-leased buildings scheduled

for completion in 2014. There are approximately 3.7 million square feet in the construction pipeline, currently 52% pre-leased.

Approximately a dozen buildings are currently under contract to close, while several additional buildings have come to market

recently. Impacting Northern Virginia, and Tysons Corner specifically, will be the opening of Phase I of the new Silver Line Metro

on July 26; tenant demand for high-end space should intensify around these five, new metro stations.

Arrows reflect differences from YTD 2Q 2013 totals Arrows reflect differences from 1Q 2014

Northern Virginia 2Q 2014

101 Constitution Avenue | Suite 325 East | Washington, DC | 20001 | 202.513.67001530 Wilson Boulevard | Suite 200 | Arlington, VA | 22209 | 703.522.4600


2Q ‘14 1Q ‘14 2Q ‘13

Direct Vacancy

15.2% 15.2% 14.8%

Total Vacancy

16.2% 16.2% 16.1%

Net Absorption (YTD)

-228,090 sf -179,430 sf - 29,305 SF

Leasing Activity(YTD)

3.8 M sf 2.1 M sf 5.09 M sf

Under Construction

1.9 M sf 2.3 M sf 3.2 M sf

Deliveries (YTD) 1.4 M sf 305,665 sf 104,000 sf

Rental Rates $31.84 fs $31.91 fs $31.99 FS

U/CPercent Pre-Leased 61.4% 53.7% 44.0%

Market Summary

The Northern Virginia office market consists of 1,533 build-ings over 25,000 square feet, totaling approximately 181.5 million square feet of rentable space.

The largest non-GSA lease signed during the second quarter was a renewal of 102,524 square feet in the Route 28 Cor-ridor South by the Parsons Corporation at Trinity Centre 3 & 4 – 5875 & 5885 Trinity Parkway.

The largest government lease signed during the second quar-ter was a renewal by the GSA- Fish & Wildlife, which executed a short-term renewal of 35,300 square feet in the Rosslyn-Ballston Corridor at Ballston Station – 4301 North Fairfax Drive.

Building sales volume totaled over $210 million during the second quarter. The largest transaction to occur was the sale of Lake Fairfax Business Center 5 & 7 – 1759 & 1760 Busi-ness Center Drive in the Reston submarket. Both buildings were 100% leased when Government Properties Income Trust purchased the pair from General Electric Asset Management.

At the end of the second quarter 2014 the Northern Virginia office market recorded 98 buildings outside of the Beltway with 50,000 square feet of contiguous space available; com-pared to only 57 buildings inside the Beltway.

Both direct and total vacancy have remained flat at 15.2% and 16.2% from the first quarter 2014 to the second quarter 2014.

The Northern Virginia office market has not experienced va-cancy rates this high since year-end 2002 when total vacancy was recorded at 16.4%. Sublet vacancies within the Northern Virginia office market re-mained flat at 1.0% from the first quarter 2014 to the second quarter 2014.

Vacancy Rate

www.lpcwashingtondc.com

Northern Virginia Quarterly overview 2nd Quarter 2014

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Absorption and Gross LeasingAs has been the trend in past quarters, the NOVA office market was host to a number of large lease transactions with tenants remaining in-place or shedding square footage leased. However, two deals in particular added growth to the market as RSA Security renewed and expanded at Parkridge Center 4 in Reston and MicroStrategy expanded at Towers Crescent in Tysons Corner.

Leasing activity slowed during the second quarter 2014, totaling 1.7 million square feet. This figure brings the year-to-date total to only 3.8 million square feet which is significantly under pace to reach or surpass NOVA’s 10-year average of 12.6 million square feet per year. There was only one lease transaction for over 100,000 square feet by the Parsons Corporation for a renewal of 102,524 square feet between two buildings in the Route 28 South submarket. It is expected that federal leasing will pick-up throughout the rest of 2014 as budgetary concerns are resolved and agencies can make sound real estate decisions.

The ten largest leases signed this quarter ranged in size from 102,524 square feet to 30,200 square feet.


A total of 6 buildings were under construction in the Northern Virginia market at the end of the second quarter 2014 (1.9 million square feet, 61.4% pre-leased).

The one project to break ground during the second quarter 2014 was the future headquarters of the National Science Foundation at 2401 Eisenhower Avenue in the Alexandria submarket. The building is planned to have 720,000 rentable square feet and deliver during the first quarter 2017. The building is 100% pre-leased to the National Science Founda-tion and is being developed by Lowe Enterprises. The project recently traded to USAA Real Estate Company.

Four buildings delivered during the second quarter for a total of 1.1 mil-lion square feet at 68% leased. The largest of the four projects to de-liver was Macerich’s Tysons Tower – 7900 Tysons One Place in the Tysons Corner submarket. The 524,979 square foot building is over 61% leased by Intelsat, Deloitte and GTT. The Peterson Companies de-livered 3443 Historic Sully Way to the Route 28 South submarket. This 375,250 square foot building is completely occupied by CIA. INOVA completed construction on 3580 Joesph Siewick Drive in the Fairfax submarket. The 112,507 square foot building will be 53% occupied by INOVA. Lastly, Penzance completed construction on 3001 Washington Boulevard, a 92,135 square foot building, which has yet to experience any leasing activity.

For More Information, Please Contact:

Neil Alt | [email protected]

Doug McLearn | [email protected]

Chris Dyson | [email protected]

Eamon McCrann | [email protected]

Karen Wright | [email protected]

Jed Prossner | [email protected]

Correll Caulfield | [email protected]

Stoddie Nibley | [email protected]

Jack Redmond | [email protected]

Tom Colicchio | [email protected]

703.522.4600

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Construction

www.lpcwashingtondc.com www.lpcwashingtondc.com

Outlook

For More Information, Please Contact:

Neil Alt | [email protected]

Doug McLearn | [email protected]

Chris Dyson | [email protected]

Eamon McCrann | [email protected]

Karen Wright | [email protected]

Jed Prossner | [email protected]

Correll Caulfield | [email protected]

Stoddie Nibley | [email protected]

Jack Redmond | [email protected]

Tom Colicchio | [email protected]

703.522.4600

Northern Virginia Quarterly overview2nd quarter 2014

Construction (Cont.)Three projects are scheduled to deliver during the third quarter 2014. In Loudoun County, Buckeye Development is slated to complete construction at 19490 Sandridge Way, a 55,681 square foot office building, which will deliver on a speculative basis. MRP’s Tysons Overlook – 7940 Jones Branch Drive in Tysons Corner is slated to finish construction next quarter as a 321,965 square foot building with LMI as an anchor tenant, occupying and owning over 50% of the building. Lastly, Comstock Partners plans to complete Loudoun Station – 43777 Central Station Drive and deliver the 49,099 square foot building on a speculative basis.

Thanks in part to a federal budget resolution passed in December of 2013 coupled with the final stages of BRAC move-outs, federal agencies and their contractor counter-parts will begin to have more clarity in making long-term real estate decisions which should drive leasing demand in the second half of 2014 and into 2015. An early example of this would be the lease signed at formerly vacant Kingstowne Ridge by Xator Corporation to be closer in proximity to the agencies it services.

The delivery of Phase I of the Silver Line metro in late July could mark the beginning of a new era in Tysons Corner and other submarkets along the Dulles Toll Road. Northern Virginia has already begun to witness asking rates increase in quality product in close proximity to the future metro stops as demand for such space increases. This will continue the trend of tenants relocating to, or remaining in transit-oriented, amenity rich submarkets.

There are currently a few large tenants in the market with requirements greater than 100,000 square feet touring properties in closer-in markets such as the Rosslyn-Ballston Corridor and Crystal City. If these tenants opt for large-blocks of currently vacant space, Northern Virginia vacancy could dramatically decrease and consequentially, there would be an uptick in positive absorption throughout the region.


There were two leases signed greater than 50,000 square feet during the second quarter 2014, with only one transac-

tion being larger than 100,000 square feet. The largest transaction of the quarter was a 102,524-square-foot renewal by

Parsons Government Services at Trinity Centre 3 & 4 - 5875 & 5885 Trinity Parkway in the Route 28 South submarket.

The second largest transaction, and largest sublet, of the quarter was a 63,324 square foot lease by Accenture, located

at Two Reston Crescent - 12018 Surise Valley Drive in the Reston/Herndon submarket. Also in Reston, RSA Security

renewed their lease and expanded to 47,743 square feet at the recently renovated Parkridge Center 4 - 10700 Parkridge

Boulevard. In Tysons Corner, MicroStrategy expanded their headquarters location by 43,047 square feet at 1850 Tow-

ers Crescent Plaza. IBM signed a short term renewal for its 36,166 square foot space at 11111 Sunset Hills Road in the

Reston/Herndon submarket. At Ballston Station - 4301 North Fairfax Drive, the Fish and Wildlife Service signed a short

term renewal for 35,300 square feet in the Rosslyn-Ballston Corridor submarket. DLT Solutions renewed the lease of their

33,340 square foot headquarters location at Presidents Park Building One - 13861 Sunrise Valley Drive in the Reston/

Herndon submarket. In the Crysal City submarket, the Food Marketing Institute renewed and expanded by 31,407 square

feet at Crystal Park Four - 2345 Crystal Drive. In the Rosslyn-Ballston Corridor submarket, the Corporate Executive Board

signed a sublease for 31,000 square feet at the Waterview Tower -1919 North Lynn Street. Lastly, Fishbowl Inc. signed a

30,200 square foot renewal at TransPotomac Canal Center 1 - 44 Canal Center Plaza, maintaining their headquarters in

the Alexandria submarket. Included in the top leases for the second quarter 2014 were five lease renewals, two renewal/

expansions, two subleases, and one expansion.


Crystal Park Four2345 Crystal Drive

Tenant: FMISize: 31,407 Expansion/Renewal

Two Reston Crescent12018 Sunrise Valley Drive

Tenant: AccentureSize: 63,324 sf Sublet

Waterview Tower1919 North Lynn Street

Tenant: Corporate Executive BoardSize: 31,000 sf Sublet

Northern Virginia Top Ten Leases 2Q 2014

11111 Sunset Hills Road

Tenant: IBMSize: 36,166 sf Renewal

Parkridge Center 410700 Parkridge Boulevard

Tenant: RSA SecuritySize: 47,743 sf Renewal/Expansion

Towers Crescent1850 Towers Crescent Plaza

Tenant: MicroStrategySize: 43,047 sf Expansion

Presidents Park Building One13861 Sunrise Valley Drive

Tenant: DLT SolutionsSize: 33,340 sf Renewal

TransPotomac Canal Center 144 Canal Center Plaza

Tenant: Fishbowl Inc.Size: 30,200 sf Renewal

Ballston Station4301 N Fairfax

Tenant: GSA - Fish and WildlifeSize: 35,300 sf

Renewal

Trinity Centre 3 & 45875 - 5885 Trinity Parkway

Tenant: Parsons Government ServicesSize: 102,524 sf Renewal


Northern Virginia Sales Transactions 2Q 2014


Plaza 1231021 Electric Avenue

Date Sold: Apr-2014Price: $3,178,866 ($65.50 psf)Buyer: Navy Federal Credit UnionSeller: Finmarc Management Inc.Class: Class BOccupancy: 0%

Lake Fairfax Business Center 5 & 71759 & 1760 Business Center Drive

Date Sold: May-2014Price: $112,250,000 ($276 psf)Buyer: Government Properties Income TrustSeller: GE Asset ManagementClass: Class AOccupancy: 100%

Gatewood Plaza10201 Lee Highway

Date Sold: Apr-2014Price: $13,750,000 ($153 psf)Buyer: Transwestern Investment MgmtSeller: Carr PropertiesClass: Class BOccupancy: 100%

Alexandria Tech Center2800 Eisenhower Avenue

Date Sold: Jun-2014Price: $13,475,000 ($116 psf)Buyer: Akridge/Long Wharf RE PartnersSeller: Garrison Investment GroupClass: Class AOccupancy: 52%

Loudoun Center Building A & B45300 & 45305 Catalina Court

Date Sold: Apr-2014Price: $11,200,000 ($140 psf)Cap Rate: 8.70%Buyer: Government Properties Income TrustSeller: GE Asset ManagementClass: Class AOccupancy: 100%

1041 Electric Avenue

Date Sold: Apr-2014Price: $8,421,134 ($70 psf)Buyer: Navy Federal Credit UnionSeller: The Hampshire Cos.Class: Class BOccupancy: 0%

Oakton Corporate Center 310467 White Granite Drive

Date Sold: Apr-2014Price: $7,500,000 ($115 psf)Buyer: ServiceSource, Inc.Seller: Peterson Cos.Class: Class AOccupancy: 100%

1775 Wiehle Avenue

Date Sold: Jun-2014Price: $41,000,000 ($315 psf)Cap Rate: 7.10%Buyer: First Potomac Realty TrustSeller: Normandy Real Estate PartnersClass: Class AOccupancy: 100%


Direct vacancy remained flat at 15.2% from the first quarter 2014 to the second quarter 2014, and has risen from 14.8% since the second quarter 2013. Total vacancy has remained flat at 16.2% from the first quarter 2014 to the second quarter 2014, and has risen from 16.1% since the second quarter 2013.

Northern Virginia recorded -48,660 square feet of absorption for the second quarter 2014, which brings the year-to-date total to -228,090 square feet.

In highly sought-after submarkets, such as Rosslyn-Ballston Corridor, Reston-Herndon, Tysons Corner and Crystal City, an abun-dance of quality space is providing leverage to tenants. Consequentially, this is forcing the hand of owners and landlords alike to offer incentives, such as tenant improvement packages and concessions, that are larger and more generous than previously experienced throughout the region. Examples include $90-$100 psf in tenant improvement allowances and significant abatement inside the base term.

Inside the Beltway, there were 57 buildings marketing 50,000 square feet or greater of contiguous space available at the end of the second quarter 2014, compared to 59 buildings from the first quarter 2014.

Outside the Beltway, there were 98 buildings marketing 50,000 square feet or greater of contiguous space available at the end of the second quarter 2014, compared to 100 buildings from the first quarter 2014.

Highlights

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NEIL ALT CORRELL CAULFIELD TOM COLICCHIO ELAINE CLANCY CHRIS DYSON ERIN JONES EAMON MCCRANN DOUG MCLEARN STODDIE NIBLEY JED PROSSNER JACK REDMOND KAREN WRIGHT

Northern Virginia Market Spotlight 2Q 2014

ASKING RENTAL RATES (FULL SERVICE)

2004: $27.58 PSF2013: $32.26 PSF

YTD 2014: $31.84 PSF

INVENTORY: 181.5 MILLION SFDIRECT VACANCY: 15.2%TOTAL VACANCY: 16.2%

YTD ABSORPTION: -228,090 SFYTD LEASING ACTIVITY: 3.8 MILLION SFUNDER CONSTRUCTION: 1.9 MILLION SF

% PRE-LEASED: 61.4%YTD DELIVERIES: 1.4 MILLION SF

10 YEAR AVERAGES (2004-2013)

TOTAL ABSORPTION: 2.1 MILLION SF/YRTOTAL LEASING ACTIVITY: 12.6 MILLION SF/YR

DELIVERIES: 2.8 MILLION SF/YR

Building Name Submarket Building Size Available Pre-Leased Delivery Date Developer Major Tenant(s)

19490 Sandridge Way Route 7 Corridor/Loudoun County

55,681 sf 55,681 sf 0.0% 3rd qtr ‘14 Buckeye Development

None

Tysons Overlook - 7940 Jones Branch Drive

Tysons Corner 321,965 sf 140,074 sf 56.5% 3rd qtr ‘14 MRP Realty LMI

Loudoun Station -43791 Central Station Drive

Route 28 North

49,099 sf 49,099 sf 0.0% 3rd qtr ‘14 Comstock Partners

None

COPT @ Westfields - 4850/4870 Stonecroft Boulevard

Route 28 South

300,000 sf 0 sf 0% 4th qtr ‘14/1st qtr ‘15

COPT CIA

1775 Tysons Boulevard Tysons Corner 476,913 sf 476,913 sf 0% 1st qtr ‘16 Lerner Enterprises

None

National Science Foundation HQ - 2401 Eisenhower Avenue

Alexandria 720,000 sf 0 sf 97.2% 1st qtr ‘17 Lowe Enterprises

NSF

720,000 sf = 2nd Quarter start Total Under Construction = 1.9 Million sf 61.4% Pre-leased (does not include condos)

Four buildings delivered during the second quarter for a total of 1.1 million square feet at 68% leased. The largest of the four projects to deliver was Macerich’s Tysons Tower – 7900 Tysons One Place in the Tysons Corner submarket. The 524,979 square foot building is over 61% leased by Intelsat, Deloitte and GTT. The Peterson Companies delivered 3443 Historic Sully Way to the Route 28 South submarket. This 375,250 square foot building is completely occupied by CIA. INOVA completed construction on 3580 Joesph Siewick Drive in the Fairfax submarket. The 112,507 square foot building will be 53% occupied by INOVA. Lastly, Penzance completed construction on 3001 Washington Boulevard, a 92,135 square foot building, which has yet to experience any leasing activity.


Northern Virginia Under Construction

2nd quarter 2014


Direct vacancy in Alexandria has decreased from 17.1% in the first quarter 2014 to 16.9% in the second quarter 2014, and has decreased from 17.1% since second quarter 2013. Total vacancy increased from 17.7% from the first quarter 2014 to 18.6% in the second quarter 2014, and has increased from 18.2% since second quarter 2013.

Year-to-date absorption in the Alexandria submarket was recorded at 11,323 square feet, which is a significant reduction from the 116,955 square foot positive drive last quarter. The primary contribution to negative absorption that facilitated this change was a 160,902 square foot move-out from 4825 Mark Center Drive by C.N.A. Corporation, which moved into 153,125 square feet in the Rosslyn-Ballston Corridor submarket.

Lowe Enterprises broke ground this quarter on the future National Science Foundation headquarters located at 2401 Eisenhower Avenue. At 720,000 square feet it is the largest office project currently under construction in the Northern Virginia market. The NSF has already pre-leased 97.2% of the building. USAA Real Estate Co. recently purchased the 2-acre parcel for $55 million from the Hoffman Co. LLC, approximately $27.5 million per acre. This purchase includes not only the land itself, but also archi-tectural plans pre-approved by Alexandria and the 15-year lease with the GSA.

A large sales transaction that occurred in the Alexandria submarket was the sale of Alexandria Tech Center – 2800 Eisenhower Avenue. The 116,175 square foot building was purchased by a joint venture of Akridge and Long Wharf Real Estate Partners for $13,475,000 or $116 psf. The building was approximately 52% leased upon purchase but has since fallen to approximately 14% leased.

Highlights

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NEIL ALT CORRELL CAULFIELD ELAINE CLANCY TOM COLICCHIO CHRIS DYSON ERIN JONES EAMON MCCRANN DOUG MCLEARN STODDIE NIBLEY JED PROSSNER JACK REDMOND KAREN WRIGHT

Alexandria Market Spotlight 2Q 2014


2004: 27.74 PSF2013: $31.24 PSF

YTD 2014: $31.18 PSF


YTD ABSORPTION: 11,323 SFYTD LEASING ACTIVITY: 344,128 SFUNDER CONSTRUCTION: 720,000 SF

% PRE-LEASED: 97.2%YTD DELIVERIES: 0 SF


TOTAL ABSORPTION: 174,601 SF/YRTOTAL LEASING ACTIVITY: 851,455 SF/YR

DELIVERIES: 343,542 SF/YR

Cameron Run Office Park3601 Eisenhower Avenue

Tenant: Savi TechnologySize: 12,463 sf Renewal

Huntwood Plaza5845 Richmond Highway

Tenant: OmnificsSize: 12,841 sf Renewal

TransPotomac Canal Center 144 Canal Center Plaza

Tenant: Fishbowl Inc.Size: 30,200 sf Renewal


Date Sold: Jun-2014Price: $13,475,000 ($116 psf)Buyer: Akridge/Long Wharf RE PartnersSeller: Garrison Investment GroupClass: Class AOccupancy: 52%

NSF HQ2401 Eisenhower Avenue

Size: 720,000 sfPrelease: 97.2%Delivery: 1st Qtr 2017Developer: Lowe EnterprisesMajor Tenant: NSF


Tenant: Cobalt GroupSize: 10,214 sf Sublet

515 King Street

Tenant: Ricondo & AssociatesSize: 26,450 sf Renewal

Major Leases

saLes


Alexandria 2nd Quarter 2014

Under ConstrUCtion


Direct vacancy in Crystal City has decreased from 23.4% in the first quarter 2014 to 22.5% the second quarter 2014, and has increased from 21.0% since second quarter 2013. Total vacancy has decreased from 24.5% in the first quarter 2014 to 23.1% in the second quarter 2014, and has increased from 21.1% since second quarter 2013.

The Crystal City submarket recorded 31,370 square feet of year-to-date positive absorption during the second quarter 2014. Contributing to the positive absorption was a move-in by Equus Capital Partners at 2900 Crystal Drive and by Ameri-can Public Power at Crystal Park 5.

Vornado has tapped the now vacant (BRAC-GSA) Crystal Plaza 6 – 2221 Street Clark Street to be redeveloped and reposi-tioned as a multi-family project. In cooperation with WeWork, the former 171,953-square-foot building will be re-purposed for a projected 252 “micro-units” with ground floor retail. The redevelopment is expected to begin in August 2014.

Kimco Realty Corp. has announced that it is reversing its redevelopment plans for the Pentagon Centre due to the strength of the multifamily market, proposing a 450-unit residential building as part of the first phase. The second phase will consist of two office buildings totalling 475,000 square feet, with no plans to start in the near future.

Highlights

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Crystal City Market Spotlight 2Q 2014


2004: $33.51 PSF2013: $41.12 PSF

YTD 2014: $38.68 PSF


YTD ABSORPTION: 31,370 SFYTD LEASING ACTIVITY: 317,797 SF

UNDER CONSTRUCTION: 0 SF% PRE-LEASED: 0%

YTD DELIVERIES: 0 SF


TOTAL ABSORPTION: -46,501 SF/YRTOTAL LEASING ACTIVITY: 957,197 SF/YR


Crystal Gateway 31215 South Clark Street

Tenant: L-3 CommunicationsSize: 28,000 sf Relet

There were no buildings sold in the Crystal City submarket during the second quarter 2014.

There were no new construction starts in the Crystal City submarket during the second quarter 2014.


Tenant: FMISize: 31,407 sf Expansion/Renewal


Tenant: GSA - DoDSize: 24,266 sf Renewal


Tenant: Communities in SchoolsSize: 16,822 sf Relet


Tenant: Alenia AermacchiSize: 16,025 sf Relet

Crystal Park Two2121 Crystal Drive

Tenant: ITG, LLCSize: 25,451 sf Sublet

Crystal Gateway North201 South 12th Street

Tenant: US NavySize: 25,588 sf Renewal

Major Leases

saLes


Crystal City 2nd Quarter 2014

Under ConstrUCtion


Direct vacancy in Fairfax has decreased from 13.7% in the first quarter 2014 to 13.5% in the second quarter 2014, and has increased from 12.6% since second quarter 2013. Total vacancy has decreased from 14.3% in the first quarter 2014 to 14.1% in the second quarter 2014, and has increased from 13.9% since second quarter 2013.

The Fairfax submarket recorded -23,900 square feet of negative absorption during the second quarter, bringing the year-to-date total to -38,038 square feet. Contributions to the negative absorption from the second quarter came from small move-outs at 11320 Random Hills Road and 4035 Ridge Top Road.

The purchase of Gatewood Plaza - 10201 Lee Highway by Transwestern Investment Management was the largest sales trans-action in the Fairfax submarket during the second quarter. Carr Properties sold the 89,598 square foot building for $13,750,000 or $153 psf. The building was 100% leased at the time of purchase.

Highlights

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Fairfax Market Spotlight 2Q 2014


2004: $23.86 PSF2013: $27.09 PSF

YTD 2014: $26.49 PSF


YTD ABSORPTION: -38,038 SFYTD LEASING ACTIVITY: 413,610 SF


YTD DELIVERIES: 112,507 SF


TOTAL ABSORPTION: -2,795 SF/YRTOTAL LEASING ACTIVITY: 810,524 SF/YR


Fair Oaks Business Park11216 Waples Mill Road

Tenant: ThinkGeekSize: 15,316 sf Renewal

Fair Lakes 312600 Fair Lakes Circle

Tenant: RK&K EngineersSize: 15,092 sf Relet

Fair Oaks Plaza11350 Random Hills Road

Tenant: Ritzert & Leyton, PCSize: 10,655 sf Renewal

Gatewood Plaza10201 Lee Highway

Date Sold: Apr-2014Price: $13,750,000 ($153 psf)Buyer: Transwestern Investment ManagementSeller: Carr PropertiesClass: Class BOccupancy: 100%

Oakton Corporate Center 310467 White Granite Drive

Date Sold: Apr-2014Price: $7,500,000 ($115 psf)Buyer: ServiceSource, Inc.Seller: Peterson Cos.Class: Class AOccupancy: 100%

There were no new construction starts in the Fairfax submarket during the second quarter 2014.

Sherwood Plaza9990 Fairfax Boulevard

Tenant: Virginia Vision Associates Size: 19,469 sf Relet

Major Leases

saLes


Fairfax 2nd quarter 2014

Under ConstrUCtion


Direct vacancy in Loudoun County has decreased from 16.5% in the first quarter 2014 to 15.0% in the second quarter 2014, and has decreased from 15.5% since second quarter 2013. Total vacancy has decreased from 17.1% in the first quarter 2014 to 15.5% in the second quarter 2014, and has decreased from 15.7% since second quarter 2013.

Absorption in the Loudoun County submarket during the second quarter was recorded at 177,551 square feet, bringing the year-to-date total to -56,344. This is a significant positive change from the -239,904 square feet of absorption re-ported in the first quarter 2014. This positive movement was primarily driven by an 83,278 square foot move-in at 45600 Woodland Road by the Bureau of Safety & Environmental Enforcement.

Loudoun County’s vacancy rates will potentially spike during the third quarter due to the speculative deliveries of 19490 Sandridge Way and Loudoun Station - 43777 Central Station Drive. If both developments remain at 0% pre-leased, a total of 104,780 vacant square feet will be added to the submarket when complete.

Highlights

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Loudoun County Market Spotlight 2Q 2014


2004: $22.54 PSF2013: $24.54 PSF

YTD 2014: $24.25 PSF


YTD ABSORPTION: -56,344 SFYTD LEASING ACTIVITY: 446,001 SFUNDER CONSTRUCTION: 104,780 SF

% PRE-LEASED: 0%YTD DELIVERIES: 55,000 SF




Building 719490 Sandridge Way

Size: 55,681 sfPrelease: 0%Delivery: 3rd Qtr 2014Developer: Buckeye DevelopmentMajor Tenant: None

Loudoun Station43777 Central Station Drive

Size: 49,099 sfPrelease: 0%Delivery: 3rd Qtr 2014Developer: Comstock PartnersMajor Tenant: None

Signal Hill Office Building21335 Signal Hill Plaza

Tenant: Northern Virginia Community CollegeSize: 14,255 sf Relet

Ashbrook Five20110 Ashbrook Place

Tenant: Forfeiture Support Associates, LLCSize: 15,643 sf Renewal



Village at Leesburg1608 Village Market Boulevard

Tenant: PhishmeSize: 12,494 sf Relet

Major Leases

saLes


Loudoun county 2nd Quarter 2014

Under ConstrUCtion


Direct vacancy in Merrifield has decreased from 11.9% in the first quarter 2014 to 11.6% in the second quarter 2014, and has increased from 11.0% since second quarter 2013. Total vacancy has decreased from 13.9% in the first quarter 2014 to 12.5% in the second quarter 2014, and has decreased from 12.6% since second quarter 2013.

Year-to-date absorption in the Merrfield submarket is 121,831 square feet. A major contribution to this positive absorp-tion was the occupancy of over 50,000 square feet by ICSS NETT and Pyramid Systems at 2677 Prosperity Avenue.

It is noteworthy that the Merrifield submarket experienced a $1.02 psf drop in asking rents from the first quarter. An explanation for this decrease might be that landlords are lowering asking rents to compete with metro accessible options in Tysons Corner, with the new metro stations scheduled to open in July.

Highlights

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Merrifield Market Spotlight 2Q 2014


2004: $26.79 PSF2013: $30.99 PSF

YTD 2014: $30.17 PSF








2750 Prosperity Avenue

Tenant: Kforce Government SolutionsSize: 19,928 sf Renewal

3110 Fairview Park Drive

Tenant: Zimmerman Associates, Inc.Size: 17,865 sf Sublet

3120 Fairview Park Drive

Tenant: CTACSize: 18,679 sf Relet

105 West Broad Street

Tenant: Viget Labs, LLCSize: 10,772 sf Relet

Major Leases

saLes


Merrifield 2nd Quarter 2014

Under ConstrUCtion

There were no new construction starts in the Merrifield submarket during the second quarter 2014.

There were no buildings sold in the Merrifield submarket during the second quarter 2014.


Direct vacancy in the Rosslyn-Ballston Corridor has increased from 16.4% in the first quarter 2014 to 16.5% in the second quarter 2014, and has increased from 13.2% since second quarter 2013. Total vacancy has decreased from 17.2% the first quarter 2013 to 17.1% in the second quarter 2014, and has increased from 14.4% since second quarter 2013.

Year-to-date absorption in the Rosslyn-Ballston Corridor submarket finished at -215,003 square feet. Although still a negative quarter, absorption for the second quarter alone was -43,956, which is less of a negative slide compared to the prior three quar-ters, which were all less than -75,000 square feet. This positive change was primarily driven by 153,125 square foot move-in by CNA Corporation at 3003 Washington Boulevard.

Two of the top ten leases completed in Northern Virginia during the second quarter were done in the Rosslyn-Ballston Corridor. The Fish and Wildlife Service will remain in its 35,300 square foot space in Ballston Station – 4301 North Fairfax Drive for an addi-tional six months, and Corporate Executive Board signed a sublease for 31,000 square feet in Waterview Tower - 1919 North Lynn Street.

The Arlington County Board unanimously approved the demolition of 1401 Wilson Boulevard and 1400 Key Boulevard along with their parking garage, which was the famous meeting location used by “Deep Throat” during the Watergate scandal. Both build-ings are to be replaced with a 24-story office building, along with a residential property and public gardens. Monday Properties is handling the redevelopment project and does not yet have a time frame established.

Highlights

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Rosslyn-Ballston Corridor Market Spotlight 2Q 2014


2004: $31.67 PSF2013: $42.29 PSF

YTD 2014: $41.69 PSF


YTD ABSORPTION: -215,003 SFYTD LEASING ACTIVITY: 543,481 SF




TOTAL ABSORPTION: 266,750 SF/YRTOTAL LEASING ACTIVITY: 1.9 MILLION SF/YR


Arlington Gateway901 North Glebe Road

Tenant: Institute for JusticeSize: 29,000 sf Expansion/Renewal

Commonwealth Tower1300 Wilson Boulevard

Tenant: IDSASize: 17,523 sf Renewal

Stafford Place II4121 Wilson Boulevard

Tenant: NTCASize: 30,000 sf Renewal

Two Ballston Plaza1110 North Glebe Road

Tenant: CITISize: 29,000 sf Renewal

Arlington Tower1300 North 17th Street

Tenant: U.S. Department of JusticeSize: 21,262 sf Relet

Navy League Building2300 Wilson Boulevard

Tenant: Excella ConsultingSize: 13,235 sf Renewal

800 North Glebe Road

Tenant: EvolentSize: 27,813 sf Expansion

Ballston Station4301 North Fairfax Drive

Tenant: GSA - Fish and Wildlife ServiceSize: 35,300 sf Renewal

Waterview Tower1919 North Lynn Street

Tenant: CEBSize: 31,000 sf Sublet

Major Leases

saLes


RB Corridor 2nd quarter 2014

Under ConstrUCtion

There were no buildings sold in the Rosslyn-Ballson Corridor submarket during the second quarter 2014.

There were no new construction starts in the Rosslyn-Ballson Corridor submarket during the second quarter 2014.


Direct vacancy has increased from 10.8% in the first quarter 2014 to 11.2% in the second quarter 2014, and has de-creased from 13.2% since second quarter 2013. Total vacancy has increased from 12.4% from the first quarter 2014 to 12.9% the second quarter 2014, and has decreased from 15.3% since second quarter 2013. Direct vacancy in Reston has increased from 11.8% in the first quarter 2014 to 12.4% in the second quarter 2014, and has decreased from 13.5% since second quarter 2013. Total vacancy has increased from 13.8% the first quarter 2014 to 14.6% in the second quarter 2014, and has decreased from 15.2% since second quarter 2013. Direct vacancy in Herndon has increased from 9.2% in the first quarter 2014 to 9.4% in the second quarter 2014 and has decreased from 12.5% since second quarter 2013. Total vacancy has remained flat at 10.2% from the first quarter 2014, and has decreased from 13.9% since second quarter 2013. Year-to-date absorption in the Reston/Herndon submarket finished the quarter at 15,352 square feet. Contributing to the positive absorption were Appian Capital at 10780-10790 Parkridge Boulevard moving into 55,464 square feet, and Micro-Pact Engineering occupying 20,845 square feet at 12901 Worldgate Drive.

Highlights

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Reston-Herndon Market Spotlight 2Q 2014


2004: $24.67 PSF2013: $27.53 PSF

YTD 2014: $27.85 PSF








Major Leases

saLes


Reston-herndon2nd Quarter 2014

Under ConstrUCtion

There were no new construction starts in the Reston-Herndon submarket during the second quarter 2014.

Plaza America Tower 311720 Plaza America Drive

Tenant: Bechtel CorporationSize: 21,731 sf Sublet

Two Discovery Square12012 Sunset Hills Road

Tenant: MicrosoftSize: 22,673 sf Expansion

One Global View2550 Wasser Terrace

Tenant: NACHASize: 24,930 sf Relet

Commerce Metro Center IV11400 Commerce Park Drive

Tenant: ClarabridgeSize: 21,952 sf Expansion/Renewal

Reston Plaza 112030 Sunrise Valley Drive

Tenant: GSA - Department of the InteriorSize: 20,324 sf Renewal

Presidents Park Building One13861 Sunrise Valley Drive

Tenant: DLT SolutionsSize: 33,340 sf Renewal

One Reston Overlook12011 Sunset Hills Road

Tenant: STG, Inc.Size: 27,822 sf Renewal

10700 Parkridge Boulevard

Tenant: RSA SecuritySize: 47,743 sf Renewal/Expansion

Lake Fairfax Business Center 5 & 71759 & 1760 Business Center Drive

Date Sold: May-2014Price: $112,250,000 ($276 psf)Buyer: Government Properties Income TrustSeller: GE Asset ManagementClass: Class AOccupancy: 100%

Two Reston Crescent12018 Sunrise Valley Drive

Tenant: AccentureSize: 63,324 sf Sublet

1775 Wiehle Avenue

Date Sold: Jun-2014Price: $41,000,000 ($315 psf)Cap Rate: 7.10%Buyer: First Potomac Realty TrustSeller: Normandy Real Estate PartnersClass: Class AOccupancy: 100%

11111 Sunset Hills Road

Tenant: IBMSize: 26,166 sf Renewal


Direct vacancy in the Route 28 North submarket has decreased from 19.6% in the first quarter 2014 to 18.8% in the sec-ond quarter 2014, and has increased from 17.7% since second quarter 2013. Total vacancy has decreased from 20.6% in the first quarter 2014 to 19.7% in the second quarter 2014, and has increased from 17.9% since second quarter 2013.

Year-to-date absorption in the Route 28 North submarket ended the quarter at -132,118 square feet. Although still remain-ing negative due to last quarter, there was 108,579 square feet of positive absorption within the second quarter itself, which represents a significant recovery. This positive movement was driven by a 83,278 square foot move-in by the Bu-reau of Safety & Environmental Enforcement at 45600 Woodland Road and a 27,552 square foot move-in by New Jersey based Orbcomm, Inc. at Loudoun Gateway V - 22970 Indian Creek Drive.

As part of a regional consolidation effort, AOL will be vacating Dulles Tech Center - 22070 Broderick Drive and has since been shopping the building on the sales market. The 161,750 square foot building is now being considered by prospective buyers as a data center conversion opportunity due to its location in a widely sought after data center hub.

Loudoun Station - 43777 Central Station Drive is scheduled to deliver during the third quarter 2014, which will raise va-cancy rates if the 49,099 square foot building delivers without any pre-lease activity.

Highlights

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Route 28 North Market Spotlight 2Q 2014


2004: $21.28 PSF2013: $23.88 PSF

YTD 2014: $23.58 PSF



% PRE-LEASED: 0%YTD DELIVERIES: 0 SF




Major Leases

saLes


Route 28 North2nd quarter 2014

Under ConstrUCtion

Loudoun Station43777 Central Station Drive

Size: 49,099 sfPrelease: 0%Delivery: 3rd Qtr 2014Developer: Comstock PartnersMajor Tenant: None

Signal Hill Office Building21335 Signal Hill Plaza

Tenant: NVCCSize: 14,255 sf Relet




Direct vacancy in the Route 28 South submarket has increased from 14.3% in the first quarter 2014 to 14.7% in the second quarter 2014, and has decreased from 14.9% since second quarter 2013. Total vacancy has increased from 15.0% from the first quarter 2014 to 15.4% in the second quarter 2014, and has decreased from 15.8% since second quarter 2013.

The Route 28 South submarket finished the second quarter with 29,858 square feet of positive absorption, which brings the year-to-date total to 14,470 square feet. A major contribution to the positive absorption was the occupancy of 23,131 square feet by Westcon at 14850 Conference Center Drive.

The Route 28 South submarket was host to the largest individual lease transaction completed in Northern Virginia during the sec-ond quarter. Parsons Government Services renewed 102,524 square feet at Trinity Centre 3 & 4 - 5875 & 5885 Trinity Parkway.

The CIA continues to expand its presence in the submarket as 3443 Historic Sully Way delivered 375,250 square feet, occupied entirely by the agency. 4850 & 4870 Stonecroft Boulevard are scheduled to deliver 300,000 square feet in early 2015 which will also be entirely occupied by the CIA.

Highlights

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Route 28 South Market Spotlight 2Q 2014


2004: $22.18 PSF2013: $25.16 PSF

YTD 2014: $25.01 PSF


YTD ABSORPTION: 14,740 SFYTD LEASING ACTIVITY: 117,894 SFUNDER CONSTRUCTION: 300,000 SF

% PRE-LEASED: 100%YTD DELIVERIES: 375,250 SF



DELIVERIES: 523, 082 SF/YR

COPT @ Westfields4850 & 4870 Stonecroft Boulevard

Size: 300,000 sfPrelease: 100%Delivery: 1st Qtr 2015Developer: COPTMajor Tenant: CIA

Trinity Centre 3 & 45875 & 5885 Trinity Parkway

Tenant: Parsons Government ServicesSize: 102,524 sf Renewal

There were no buildings sold in the Route 28 South submarket during the second quarter 2014.

Major Leases

saLes


Route 28 South2nd quarter 2014

Under ConstrUCtion


Direct vacancy in the Springfield submarket has decreased from 21.5% in the first quarter 2014 to 21.3% in the second quarter 2014, and has increased from 16.7% since second quarter 2013. Total vacancy has decreased from 24.1% in the first quarter 2014 to 23.8% in the second quarter 2014, and has increased from 19.4% since second quarter 2013.

Year-to-date absorption in the Springfield submarket was recorded at 13,487 square feet by the end of the second quarter. Con-tributing to this positive absorption were a handful of small move-ins throughout the submarket.

Due in part to the constraints of BRAC, Belvoir Corporate Campus - 7951 & 7961 Loisdale Road still remains vacant since its delivery in late 2013.

There was a bright spot for government-related leases in the submarket this quarter, as government contractor Xator Corpora-tion signed a lease at Kingstowne Ridge – 5680 King Centre Drive for 26,187 square feet. This lease is significant as it is the first lease to be executed at the recently completed Kingstowne Ridge, which has remained vacant for the last three quarters.

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Springfield Market Spotlight 2Q 2014


2004: $25.12 PSF2013: $28.37 PSF

YTD 2014: $29.11 PSF








There were no new construction starts in the Springfield submarket during the second quarter 2014.

Major Leases

saLes


Springfield 2nd Quarter 2014

Under ConstrUCtion

There were no buildings sold in the Springfield submarket during the second quarter 2014.

Kingstowne Ridge5680 King Centre Drive

Tenant: Xator CorporationSize: 26,187 sf

New

Poplar Run Office Park 55285 Shawnee Road

Tenant: Washington GasSize: 14,191 sf

Relet

Springfield Corporate Center 16225 Brandon Avenue

Tenant: Permuta TechnologiesSize: 11,768 sf Relet

MetroPark @ Springfield Metro North6359 Walker Lane

Tenant: Armed Services YMCASize: 11,507 sf

Renewal


Direct vacancy in the Tysons Corner submarket has increased from 13.9% in the first quarter 2014 to 15.0% in the second quarter 2014, and has increased from 13.7% from the second quarter 2013. Total vacancy has increased from 14.5% from the first quar-ter 2014 to 15.7% in the second quarter 2014, and has increased from 14.7% since second quarter 2013.

MicroStrategy signed a 43,047 square foot expansion at its headquarters in 1850 Towers Crescent Plaza, which was one of the only transactions to represent organic growth throughout Northern Virginia. Once the expansion is complete in the fourth quarter 2014, MicroStrategy will occupy two additional floors and the majority of the space in the building, at 256,531 square feet.

Late in the quarter, the WMTA announced an official completion date for the first phase of the Silver Line, which will transport its first passengers on July 26. Four of the newly constructed metro stops are located in Tysons.

The largest office project to deliver in Northern Virginia this year was Macerich’s Tysons Tower – 7900 Tysons One Place. The 524,979 square foot, 22 story building is over 61% leased by Intelsat, Deloitte and GTT. The tower is the first Silver Line-accessi-ble high-rise development in Tysons Corner, with direct access to the Tysons I and II metro stations. The building is the first of two phases, the second of which will consist of expansive retail, residential and public green space.

Highlights

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Tysons Corner Market Spotlight 2Q 2014


2004: $25.10 PSF2013: $30.18 PSF

YTD 2014: $32.42 PSF



% PRE-LEASED: 22.8%YTD DELIVERIES: 524,979 SF




Towers Crescent1850 Towers Crescent Plaza

Tenant: MicroStrategySize: 43,047 sf Expansion

Greensboro Corporate Center 18401 Greensboro Drive

Tenant: Celerity ITSize: 21,617 sf Renewal

North Tower7799 Leesburg Pike

Tenant: USISSize: 17,025 sf Relet

Westwood Metro Tower8614 Westwood Center Drive

Tenant: XL AlonSize: 19,210 sf Relet

Tysons Overlook7940 Jones Branch Drive

Size: 321,965 sfPrelease: 56.5%Delivery: 3rd Qtr 2014Developer: MRP RealtyMajor Tenant: LMI

The Corporate Office Centre @ Tysons II1775 Tysons Boulevard

Size: 476,913 sfPrelease: 0.0%Delivery: 1st Qtr 2016Developer: Lerner EnterprisesMajor Tenant: None

1041 Electric Avenue

Date Sold: Apr-2014Price: $8,421,134 ($70 psf)Buyer: Navy Federal Credit UnionSeller: The Hampshire Cos.Class: Class BOccupancy: 0%

Plaza 1231021 Electric Avenue

Date Sold: Apr-2014Price: $3,178,866 ($65.50 psf)Buyer: Navy Federal Credit UnionSeller: Finmarc Management Inc.Class: Class BOccupancy: 0%

Greensboro Park8180 Greensboro Drive

Tenant: Athavale, Lystad & AssociatesSize: 10,889 sf Renewal

North Tower1751 Pinnacle Drive

Tenant: Uber OfficesSize: 16,200 sf Expansion

Tysons Metro Center III8281 Greensboro Drive

Tenant: ID.me, Inc.Size: 10,999 sf Relet

Fairfax Square Tower 18065 Leesburg Pike

Tenant: Keel Point, LLCSize: 12,000 sf Renewal

Towers Crescent/A8000 Towers Crescent Drive

Tenant: Capital OneSize: 27,263 sf Expansion

Major Leases

saLes


Tysons Corner 2nd quarter 2014

Under ConstrUCtion

Metropolitan DC Market Overview 2Q 2014

Documents

Transcript of Metropolitan DC Market Overview 2Q 2014