National Presence. Local Focus

Transcription

1 Metropolitan DC Market Overview 3Q 214 Overall Market Summary The Washington, DC Metropolitan commercial real estate market is comprised of approximately 41.5 million square feet of rentable office space located in the District of Columbia, Northern Virginia, and Suburban Maryland. The total vacancy rate increased to 15.5% in the third quarter, up from 15.4% at the end of the previous quarter. The market recorded approximately -47, square feet of net absorption in the third quarter, a moderate decrease from the 14, square feet absorbed in the second quarter. Leasing activity increased with 6.5 million square feet in transactions signed during the third quarter. The largest lease executed was a renewal signed by the GSA for the Department of Defense for 66,575 square feet in Alexandria, VA. Two buildings completed construction in the third quarter (1 DC, 1 VA, MD), totaling 224,831 square feet and 47% leased. There were eighteen sale transactions in the third quarter, comprising of 2.6 million rentable square feet and totaling $86 million (a 22% decrease in value from the $1.1 billion that sold in the previous quarter). Average asking rental rates ticked up $.14 to $35.59 per square foot, Full Service. From July 213 to July 214 employment in the DC Metropolitan area had a net increase of 19,8 jobs (23,9 private sector, -4,1 government) representing.6% growth, while the unemployment rate increased to 5.6%. Direct Vacancy Total Vacancy Total Net Absorption Leasing Activity DC 1.7% 11.3% -66,595 SF 6.5 M SF VA 16.% 16.9% -292,93 SF 8.2 M SF MD 16.5% 17.1% -77,779 SF 3.1 M SF Metro Area 14.7% 15.5% -1.1 M SF 17.8 M SF Arrows reflect differences from 2Q 214 Arrows reflect differences from YTD 3Q 213 totals Outlook As low economic and 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 214. 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 private sector tenants leverage the current market conditions. The GSA should continue to execute renewals as well, however, their primary focus will be on consolidating and downsizing federal office space requirements when possible. To maintain or increase competitiveness in this tenant s market, aggressive landlords will continue to renovate and upgrade amenities to their buildings. As the GSA and the private sector (as seen with the larger DC law firms) continue to reduce space requirements, vacancy is expected to tick upward, while net absorption is expected to remain negative. While the construction pipeline remains limited, there will be an uptick of new inventory with eight new buildings, totaling 1.3 million square feet, scheduled to deliver over the next two quarters. Sales velocity is expected to decline as the are approximately a dozen buildings currently under contract. Phase I of the Silver Line Metro opened in July, with four of it s five stops located in the Tysons submarket. Demand for high-end office space should intensify around these Metro stations, and in Tysons in general. 11 Constitution Avenue Suite 325 East Washington, DC Wilson Boulevard Suite 2 Arlington, VA

2 Northern Virginia 3Q 214 Market Summary The Northern Virginia office market consists of 1,534 buildings over 25, square feet, totaling approximately million square feet of rentable space. The largest non-gsa lease signed during the third quarter was a pre-lease of 348,847 square feet the Rosslyn-Ballston Corridor by the Corporate Executive Board at The CEB Tower 121 Wilson Boulevard. CEB will vacate their current space nearby at 1919 North Lynn Street and 1777 North Kent Street and will occupy the first through the twentieth floors. The largest government lease signed during the third quarter was a renewal by the GSA Department of Defense for 66,575 square feet in the Alexandria submarket at Hoffman Tower 2 2 Stovall Street. This transaction is one of the five largest leases executed in the past five years throughout the Washington, D.C. Metropolitan area. Building sales volume totaled over $365.8 million during the third quarter. The most notable transaction to occur was the sale of 1776 Wilson Boulevard in the RB-Corridor. The 138,535-square-foot building delivered in late 212 and upon purchase was 89% leased. Invesco Advisers bought the property from Skanska for $9,3, or $652 psf, and it traded at a 5.1% cap rate. At the end of the third quarter 214 the Northern Virginia office market recorded 96 buildings outside of the Beltway with 5, square feet of contiguous space available; compared to only 58 buildings inside the Beltway. Direct Vacancy Total Vacancy Net Absorption (YTD) Leasing Activity (YTD) Under Construction Deliveries (YTD) 3Q 14 2Q 14 3Q % 15.2% 14.9% 16.9% 16.2% 15.9% -292,93 sf -228,9 sf 535,14 SF 8.2 M sf 3.8 M sf 8. M sf 1.8 M sf 1.9 M sf 2.4 M sf 1.4 M sf 1.4 M sf 884,58 sf Vacancy Rate Direct vacancy has increased from 15.2% in the second quarter 214 to 16.% in the third quarter 214, and has risen from 14.9% since the third quarter 213. Total vacancy has increased from 16.2% in the second quarter 214 to 16.9% in the third quarter 214, and has increased from 15.9% since the third quarter 213. Rental Rates $32.12 fs $31.84 fs $32.26 FS U/C Percent Pre-Leased 63.3% 61.4% 46.% 11 Constitution Avenue Suite 325 East Washington, DC Wilson Boulevard Suite 2 Arlington, VA

3 Northern Virginia Quarterly overview 3rd Quarter 214 This increase in vacancy marks the highest rate since 1992 for the Northern Virginia office market, when vacancy rates reached 19.7%. Sublet vacancies within the Northern Virginia office market remained flat at 1.% from the second quarter 214 to the third quarter 214. Deliveries vs. 1 Absorption and Gross Leasing 8 While leasing activity during the third quarter was recorded at the highest rate thus-far during 214 at 3.5 million square feet, the main driver of this leasing activity was renewals by federal agencies and contractors alike. At quarter-end, Northern Virginia is still on pace to fall short of the 1-year average of 12.6 million square feet leased Northern Virginia recorded another quarter of negative absorption at -64,813 square feet, bringing the year-to-date total to -292,93 square feet. A major contribution to this negative absorption was a consolidation by Northrop Grumman throughout their regional offices when they vacated Dulles Corner Dulles Corner Park for over 1, square feet. However, there were a handful of lease transactions that represented growth in Northern Virginia such as ATK Systems expanding in the Route 28 South Corridor at Loudoun Gateway I and Alarm.com which expanded in the Tysons Corner Market by relocating to Tysons Metro III. The ten largest leases signed during the third quarter ranged in size from 66,575 square feet to 53,84 square feet. Construction Deliveries Net Absorption Vacancy Rate Deliveries Vacancy Rate (%) No new projects broke ground during the third quarter One building delivered during the third quarter for a total of 55,681 square feet built, on a speculative basis. Lansdowne Real Estate Company delivered 1949 Sandridge Way Building 7 as a 3-story office building, and is now offering the building for lease or purchase as a condominium. Buckeye Development constructed the property, which will now be a part of the larger Riverside Office Park which hosts a mix of retail, medical, and hospitality in the Route 7 Corridor. Delivery Net Absorption Total Vacancy Rate

4 Northern Virginia Quarterly overview 3rd quarter 214 Construction (Cont.) Two projects are scheduled to deliver during the fourth quarter 214. MRP s Tysons Overlook 794 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 5% of the building. Lastly, Comstock Partners plans to complete Loudoun Station Central Station Drive and deliver the 49,99-square-foot building on a speculative basis. Outlook While there has been some resolution to federal budget uncertainty, sequestration along with the remaining BRAC move-outs planned through 215 will continue to keep federal demand to a minimum as agencies continue to opt for cost-cutting leasing fundamentals. Northern Virginia will look to the private-sector, such as growing tech companies, to drive the leasing activity throughout the next 18 months. Northern Virginia can expect effective lease terms to decline steadily throughout the next year. Through the tentative nature of private sector tenants and an absence of any federal agency or contractor leasing activity, coupled with an excess supply of space continues to turn the market in favor of the tenant. The construction pipeline will slow down as property owners will hesitate to break ground on a speculative basis due to static leasing activity throughout Northern Virginia. An example of this would be the fact that the entirety of 1812 North Moore Street remains vacant since delivering in the fourth quarter 213. For More Information, Please Contact: Neil Alt nalt@lpc.com Doug McLearn dmclearn@lpc.com Chris Dyson cdyson@lpc.com Eamon McCrann emccrann@lpc.com Jed Prossner jprossner@lpc.com Correll Caulfield ccaulfield@lpc.com Stoddie Nibley snibley@lpc.com Jack Redmond jredmond@lpc.com Tom Colicchio tcolicchio@lpc.com

5 Northern Virginia Top Ten Leases 3Q 214 All of the top ten leases signed during the third quarter 214 were greater than 5, square feet, with five transactions being larger than 1, square feet. Included in the top leases for the third quarter 214 were four lease renewals, one expansion/ extension, one pre-lease, and four relets. The largest transaction of the quarter, and the largest lease signed year-to-date 214, was a 66,575-square-foot renewal by the Department of Defense at Hoffman Tower 2-2 Stovall Street in the Alexandria submarket. The second largest transaction of the quarter was a 348,847-square-foot pre-lease by Corporate Executive Board at CEB Tower Wilson Boulevard, a proposed office building in the Rosslyn-Ballston Corridor submarket. Northrop Grumman signed a 39,797-square-foot renewal at 129 Federal Systems Park Drive in the Fairfax submarket. Arlington County Human Services signed a renewal/expansion in the Rosslyn-Ballston Corridor throughout three buildings at Sequoia Plaza 1-3 for 217,482-square-feet. Boeing signed a 168,154-square-foot lease at Parkway Square - 46 Herndon Parkway in the Reston/ Herndon submarket. In the Tysons Corner submarket, Alarm.com signed a lease for a 82,758-square-foot headquarters at Tysons Metro III Greensboro Drive. The Department of Labor executed a relet lease to relocate from the Rosslyn-Ballston Corridor to a 75,-square-foot space in Crystal Gateway North - 21 South 12th Street in the Crystal City submarket. ATK signed a 72,894-square-foot lease that consisted of a 53,84-square-foot expansion and a 19,54-square-foot extension at Loudoun Gateway I Business Court in the Route 28 North and Loudoun County submarkets. The Department of Homeland Security renewed their 71,27-square-foot space at 131 North Courthouse Road in the Rosslyn-Ballston Corridor submarket. Lastly, in the Rosslyn-Ballston Corridor, Politco signed a 6,749-square-foot lease for a new headquarters at Twin Towers South - 1 Wilson Boulevard. Hoffman Tower 2 2 Stovall Street GSA-DoD 66,575 sf CEB Tower 121 Wilson Boulevard Corporate Executive Board 348,847 sf Pre-lease 129 Federal Systems Park Dr Northrop Grumman 39,797 sf Sequoia Plaza , 211 & 212 Washington Boulevard Arlington Co. Human Services 217,482 sf /Expansion Parkway Square 46 Herndon Parkway Boeing 168,154 sf Tysons Metro III 8281 Greensboro Drive Crystal Gateway North 21 South 12th Street Loudoun Gateway I Business Court 131 North Courthouse Road Twin Towers South 1 Wilson Boulevard Alarm.com 82,758 sf GSA-DoL 75, sf ATK 72,894 sf Expansion/Extension GSA-DHS 71,27 sf Politico 6,749 sf

6 National Presence. Local Focus Northern Virginia Sales Transactions 3Q N Courthouse Road Date Sold: Price: Buyer: Seller: Class: Occupancy: Sep-214 $134,1, ($353 psf) AEW Capital Rockpoint Group/MRP Realty Class B 98% Avion Portfolio 145, 1452, 147 Avion Parkway & 3635, 365 Concorde Parkway Date Sold: Price: Buyer: Seller: Class: Aug-214 $46,5, ($148 psf) Hayden Real Estate Developments C-III Asset Management Class A (Office)/Class B (Flex) Parkridge Center Parkridge Boulevard Date Sold: Price: Cap Rate: Buyer: Jul-214 $23,25, ($214 psf) 9.4% Transwestern Investment/ Diversified International Partners Seller: TA Associates Class: Class A Occupancy: 91% 1776 Wilson Boulevard Date Sold: Price: Cap Rate: Buyer: Seller: Class: Occupancy: Jul-214 $9,3, ($652 psf) 5.1% Invesco Advisers Skanska USA Class A 83% Waterfront Center I & II 81 N Fairfax Street & 29 Madison Street Date Sold: Price: Cap Rate: Buyer: Seller: Class: Occupancy: Jul-214 $31,5, ($212 psf) 6.% Finmarc Management Gates, Hudson & Associates Class B 65.6% & Avion Parkway Date Sold: Price: Cap Rate: Buyer: Seller: Class: Occupancy: Jun-214 $18,275, ($158 psf) 7.8% Ritz Banc Group Starwood Capital Group Class A 93% Four Sevens Building 7777 Leesburg Pike Date Sold: Price: Buyer: Seller: Class: Occupancy: Jul-214 $16,, ($163 psf) Bernstein Management USP Development Class B 87% 8348 Traford Lane Date Sold: Price: Buyer: Seller: Class: Occupancy: Sep-214 $4,375, ($65.5 psf) JAG Partners, LLC (Owner/User) Traford Anchor L.P. Class B1%

7 Northern Virginia Sales Transactions 3Q Depot Court SE Date Sold: Aug-214 Price: $1,775, ($69 psf) Buyer: Naspira LLC Seller: CW Capital Class: Class B Occupancy: %

8 Northern Virginia Market Spotlight 3Q Vacancy Rate (%) Asking Rate ($) Deliveries Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption Market Stats 1 Year Averages (24-213) Total Absorption: 2.1 Million SF/YR Total Leasing Activity: 12.6 Million SF/YR Deliveries: 2.8 Million SF/YR Inventory: Million SF Direct Vacancy: 16.% Total Vacancy: 16.9% YTD Absorption: -292,93 SF YTD Leasing Activity: 8.2 Million SF : 1.8 Million SF % Pre-leased: 63.3% YTD Deliveries: 1.4 Million SF Asking Rental Rates (Full Service) 24: $27.58 PSF 213: $32.26 PSF YTD 214: $32.12 PSF Highlights Direct vacancy has increased from 15.2% in the second quarter 214 to 16.% in the third quarter 214, and has risen from 14.9% since the third quarter 213. Total vacancy has increased from 16.2% in the second quarter 214 to 16.9% in the third quarter 214, and has increased from 15.9% since the third quarter 213. Northern Virginia recorded -64,813 square feet of absorption for the third quarter 214, which brings the year-to-date total to -292,93 square feet. Contributing to the negative absorption were large move-outs by Northrop Grumman in the Reston-Herndon submarket, Fish & Wildlife Service in the RB-Corridor, and Aerospace Corporation in the Route 28 South Submarket. Inside the Beltway, there were 58 buildings marketing 5, square feet or greater of contiguous space available at the end of the third quarter 214, compared to 57 buildings from the second quarter 214. Outside the Beltway, there were 96 buildings marketing 5, square feet or greater of contiguous space available at the end of the third quarter 214, compared to 98 buildings from the second quarter 214. Neil Alt Correll Caulfield Tom Colicchio Elaine Clancy Chris Dyson Erin Jones Eamon McCrann Doug McLearn Stoddie Nibley Jed Prossner Jack Redmond

9 Northern Virginia 3rd quarter 214 Building Name Submarket Building Size Available Pre-Leased Delivery Date Developer Major Tenant(s) Tysons Overlook Jones Branch Drive Tysons Corner 321,965 sf 14,74 sf 56.5% 4th qtr 14 MRP Realty LMI Loudoun Station Central Station Drive Westfields - 485/487 Stonecroft Boulevard Route 28 North/ Loudoun Co. Route 28 South 49,99 sf 49,99 sf.% 4th qtr 14 Comstock Partners 3, sf sf % 4th qtr 14/ 1st qtr Tysons Boulevard Tysons Corner 476,913 sf 476,913 sf % 1st qtr 16 Lerner Enterprises COPT None CIA None National Science Foundation HQ Eisenhower Avenue Alexandria 7, sf 18,34 sf 97.2% 1st qtr 17 Lowe Enterprises NSF One building delivered during the third quarter for a total of 55,681-square-feet, built on a speculative basis. Lansdowne Real Estate Company delivered 1949 Sandridge Way Building 7 as a 3-story office building, and is now offering the building for lease or purchase as a condominium. Buckeye Development constructed the property, which will now be a part of the larger Riverside Office Park which hosts a mix of retail, medical and hospitality in the Route 7 Corridor. sf = 3rd Quarter start Total = 1.8 Million sf 63.3% Pre-leased (does not include condos)

10 Alexandria Market Spotlight 3Q Vacancy Rate (%) Asking Rate ($) Deliveries Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption Market Stats 1 Year Averages (24-213) Total Absorption: 174,61 SF/YR Total Leasing Activity: 851,455 SF/YR Deliveries: 343,542 SF/YR Inventory: 16.6 Million SF Direct Vacancy: 17.5% Total Vacancy: 19.1% YTD Absorption: 39,329 SF YTD Leasing Activity: 1.16 million SF : 7, SF % Pre-leased: 97.4% YTD Deliveries: SF Highlights Asking Rental Rates (Full Service) 24: PSF 213: $31.24 PSF YTD 214: $32.67 PSF Direct vacancy in Alexandria has increased from 16.9% in the second quarter 214 to 17.5% in the third quarter 214, and has increased from 16.7% since third quarter 213. Total vacancy increased from 18.6% from the second quarter 214 to 19.1% in the third quarter 214, and has increased from 17.4% since third quarter 213. After recording negative absorption last quarter, Alexandria finished the third quarter 214 with 28,6 square feet, yielding a year-to-date total of 39,329 square feet. The positive absorption can be primarily attributed to smaller occupancies such as Global Health College at 611 Stevenson Avenue for 2,645 square feet, as well as 1,935 square feet at 234 Eisenhower Avenue by Global Tech, Harmonia and SCI Group. The GSA DoD renewed for 66,575 square feet at Hoffman Tower II 2 Stovall Street, which is one of the five largest transactions completed in the past five years in the Washington Metropolitan area. The Department of Defense has occupied the entire building for the past 3 years and renewed for another three years. In close proximity to the National Science Foundation s future headquarters, Hoffman Tower I 2461 Eisenhower Avenue recently completed a multi-million dollar redevelopment project. The Hoffman Company maximized the attractiveness of the property by modernizing the building through stripping the building to its frame and applying a new façade, roof, and all of the existing internal mechanical, electrical, plumbing and vertical transportation systems serving the 14-story building. Neil Alt Correll Caulfield Elaine Clancy Tom Colicchio Chris Dyson Erin Jones Eamon McCrann Doug McLearn Stoddie Nibley Jed Prossner Jack Redmond

11 Alexandria 3rd Quarter 214 Major Leases Hoffman Tower 2 2 Stovall Street 611 Stevenson Avenue 611 Stevenson Avenue King Street Station Duke Street GSA-DoD 66,575 sf American Counseling Association 21,723 sf Global Health College 2,234 sf HR Certification Institute 18,35 sf Carlyle Place 251 Jamieson Avenue TransPotomac Plaza North Fairfax Drive Atrium Building 277 South Washington Street SAIC 13,487 sf Stites & Harbison 11,33 sf Sales Central Care 1,277 sf Sublet Waterfront Center I & II 81 N Fairfax Street & 29 Madison Street Date Sold: Jul-214 Price: $31,5, ($212 psf) Cap Rate: 6.% Buyer: Finmarc Management Seller: Gates, Hudson & Associates Class: Class B Occupancy: 65.6% NSF HQ 241 Eisenhower Avenue 7, sf Prelease: 97.4% Delivery: 1st Qtr 217 Developer: Lowe Enterprises Major NSF

12 Crystal City Market Spotlight 3Q Vacancy Rate (%) Asking Rate ($) Deliveries Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption 1 Year Averages (24-213) Total Absorption: -46,51 SF/YR Total Leasing Activity: 957,197 SF/YR Deliveries: 151,56 SF/YR Market Stats Inventory: 11.7 Million SF Direct Vacancy: 23.1% Total Vacancy: 23.7% YTD Absorption: 17,44 SF YTD Leasing Activity: 488,573 SF : SF % Pre-leased: % YTD Deliveries: SF Highlights Asking Rental Rates (Full Service) 24: $33.51 PSF 213: $41.12 PSF YTD 214: $38.61 PSF Direct vacancy in Crystal City has increased from 22.5% in the second quarter 214 to 23.1% the third quarter 214, and has decreased from 23.3% since third quarter 213. Total vacancy has increased from 23.1% in the second quarter 214 to 23.7% in the third quarter 214, and has decreased from 24.1% since third quarter 213. Crystal City recorded 22,1 square feet of positive absorption during the third quarter 214, yielding a year-to-date total of 17,44 square feet. Contributing to the consecutive quarter of positive absorption were the occupancies of 33,7 square feet by Energy Focus, National Council on Aging and National Railway Labor Conference at Crystal Square 5, as well as by American Public Power Association in 17,13 square feet at Crystal Park 5. Leasing activity during the third quarter 214 was primarily driven by a lease of 75, square feet by the GSA DoL at Crystal Gateway North 21 South 12th Street, which will relocate from Rosslyn. However, the Crystal City submarket still remains on pace to finish well below the ten year leasing activity average of 957,197 square feet. Neil Alt Correll Caulfield Elaine Clancy Tom Colicchio Chris Dyson Erin Jones Eamon McCrann Doug McLearn Stoddie Nibley Jed Prossner Jack Redmond

13 Crystal City 3rd Quarter 214 Major Leases Crystal Gateway North 21 South 12th Street Crystal Square Crystal Drive Crystal Square S 18th Street Jefferson Plaza 141 South Clark Street Jefferson Plaza 141 South Clark Street GSA-DoL 75, sf Arete Associates 3, sf Extension/Downsize National Railway Labor Conference 21,88 sf Jacobs Engineering 21,88 sf Sublet Deloitte 14,786 sf Sales There were no buildings sold in the Crystal City submarket during the third quarter 214. There were no new construction starts in the Crystal City submarket during the third quarter 214.

14 Fairfax Market Spotlight 3Q Vacancy Rate (%) Asking Rate ($) Deliveries Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption Market Stats 1 Year Averages (24-213) Total Absorption: -2,795 SF/YR Total Leasing Activity: 81,524 SF/YR Deliveries: 47,66 SF/YR Inventory: 12.3 Million SF Direct Vacancy: 13.2% Total Vacancy: 13.8% YTD Absorption: -3,179 SF YTD Leasing Activity: 849,382 SF : SF % Pre-leased: % YTD Deliveries: 112,57 SF Asking Rental Rates (Full Service) 24: $23.86 PSF 213: $27.9 PSF YTD 214: $26.67 PSF Highlights Direct vacancy in Fairfax has decreased from 13.5% in the second quarter 214 to 13.2% in the third quarter 214, and has increased from 12.7% since third quarter 213. Total vacancy has decreased from 14.1% in the second quarter 214 to 13.8% in the third quarter 214, and has decreased from 14.1% since third quarter 213. The Fairfax submarket recorded its first quarter of positive absorption for 214 with 36,384 square feet, bringing the year-todate total to -3,179 square feet. Contributing to this quarter s positive absorption were a handful of medium sized move-ins, including 1,851 square feet at Greenbriar Corporate Center 1, 15,58 square feet at 3949 Pender Drive and 14,766 square feet at Fair Oaks Commerce Center. Northrop Grumman s 39,979 square foot lease renewal at 129 Federal Systems Park Drive was one of the Top Ten transactions executed during the third quarter 214 in Northern Virginia and the largest deal done in the Fairfax submarket year-to-date. This caused the submarket to exceed its 1-year average rate of 81,524 square feet with 849,382 square feet of leasing acitivity YTD in 214. Neil Alt Correll Caulfield Elaine Clancy Tom Colicchio Chris Dyson Erin Jones Eamon McCrann Doug McLearn Stoddie Nibley Jed Prossner Jack Redmond

15 Fairfax 3rd quarter 214 Major Leases 129 Federal Systems Drive Sherwood Plaza 999 Fairfax Boulevard Oakton Corporate Center White Granite Drive Crown Fair Oaks 435 Ridge Top Road George Mason Square 2 15 West Broad Street Northrop Grumman 39, sf VA Department of General Services 19,496 sf General Dynamics 17,8 sf Expansion Fair Issac Corporation 12,284 sf Keller Williams 1,924 sf Expansion Sales There were no buildings sold in the Fairfax submarket during the third quarter 214. There were no new construction starts in the Fairfax submarket during the third quarter 214.

16 Loudoun County Market Spotlight 3Q Vacancy Rate (%) Asking Rate ($) Deliveries Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption Market Stats 1 Year Averages (24-213) Total Absorption: 431,525 SF/YR Total Leasing Activity: 711,234 SF/YR Deliveries: 468,264 SF/YR Inventory: 15 Million SF Direct Vacancy: 15.8% Total Vacancy: 16.3% YTD Absorption: 129,389 SF YTD Leasing Activity: 62,58 SF : 49,99 SF % Pre-leased: % YTD Deliveries: 11,681 SF Asking Rental Rates (Full Service) 24: $22.54 PSF 213: $24.54 PSF YTD 214: $24.12 PSF Highlights Direct vacancy in Loudoun County has increased from 15.% in the second quarter 214 to 15.8% in the third quarter 214, and has decreased from 16.2% since third quarter 213. Total vacancy has increased from 15.5% in the second quarter 214 to 16.3% in the third quarter 214, and has decreased from 16.4% since third quarter 213. Loudoun County recorded 144,595 square feet of positive absorption during the third quarter 214, which brings the yearto-date total to 129,389 square feet. This is a significant improvement compared to the -18,688 square feet of absorption recorded at the end of the third quarter 213. Major contributions to the positive absorption seen in the third quarter 214 come from a 53,84-square-foot expansion by ATK Systems at Loudoun Gateway I and from a handful of small move-ins totaling 24,578 square feet at Ashbrook Four. The only building to deliver during the third quarter 214 is the office portion of Riverside Office Park at Lansdowne, 1949 Sandridge Way in the Route 7 Corridor of Loudoun County. The 55,681-square-foot building was constructed by Buckeye Development and owned by Landsdowne Development. The building, delivered on a speculative basis, is being offered for sale as an office condo, as well as being marketed for lease. Neil Alt Correll Caulfield Elaine Clancy Tom Colicchio Chris Dyson Erin Jones Eamon McCrann Doug McLearn Stoddie Nibley Jed Prossner Jack Redmond

17 Loudoun county 3rd Quarter 214 Major Leases Loudoun Gateway I Business Court Loudoun Tech Phase I Ridgetop Circle ATK 72,894 sf Expansion/Extension Cigital 15,8 sf Sales 215 Depot Court SE Date Sold: Aug-214 Price: $1,775, ($69 psf) Buyer: Naspira LLC Seller: CW Capital Class: Class B Occupancy: % Loudoun Station Central Station Drive 49,99 sf Prelease: % Delivery: 4th Qtr 214 Developer: Comstock Partners Major None

18 Merrifield Market Spotlight 3Q Vacancy Rate (%) Asking Rate ($) Deliveries Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption Market Stats 1 Year Averages (24-213) Total Absorption: 35,686 SF/YR Total Leasing Activity: 589,579 SF/YR Deliveries: 55,44 SF/YR Inventory: 9.3 Million SF Direct Vacancy: 11.4% Total Vacancy: 12.3% YTD Absorption: 148,29 SF YTD Leasing Activity: 21,48 SF : SF % Pre-leased: % YTD Deliveries: SF Asking Rental Rates (Full Service) 24: $26.79 PSF 213: $3.99 PSF YTD 214: $3.87 PSF Highlights Direct vacancy in Merrifield has decreased from 11.6% in the second quarter 214 to 11.4% in the third quarter 214, and has remained flat at 11.4% since third quarter 213. Total vacancy has decreased from 12.5% in the second quarter 214 to 12.3% in the third quarter 214, and has decreased from 13.3% since third quarter 213. Merrifield recorded another quarter of positive absorption, finishing the third quarter at 26,198 square feet, bringing the year-to-date total to 148,29 square feet. This is a positive shift compared to 12 months prior, where year-to-date absorption was recorded at -275,771 square feet. Contributing to the positive absorption were occupancies by Zimmerman Associates for 17,865 square feet at 311 Fairview Park Drive and by NOVA Regional Commission at 34 Williams Drive for 18,746 square feet. INOVA Health System is currently in negotiations to purchase Exxon Mobil s 117-acre campus at 3225 Gallows Road, which it intends to use as a genomics research institute. Exxon Mobil plans to consolidate back to its headquarters in Irvine, TX. The campus consists of five office buildings totaling 1.34 million square feet, and includes approximately 92 acres of land that remains undeveloped. Neil Alt Correll Caulfield Elaine Clancy Tom Colicchio Chris Dyson Erin Jones Eamon McCrann Doug McLearn Stoddie Nibley Jed Prossner Jack Redmond

19 Merrifield 3rd Quarter 214 Major Leases There were no major leases in the Merrifield submarket during the third quarter 214. Sales There were no buildings sold in the Merrifield submarket during the third quarter 214. There were no new construction starts in the Merrifield submarket during the third quarter 214.

20 Rosslyn-Ballston Corridor Market Spotlight 3Q Vacancy Rate (%) 1 4 Asking Rate ($) Deliveries Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption Market Stats 1 Year Averages (24-213) Total Absorption: 266,75 SF/YR Total Leasing Activity: 1.9 Million SF/YR Deliveries: 456,48 SF/YR Inventory: 24.6 Million SF Direct Vacancy: 18.5% Total Vacancy: 19.3% YTD Absorption: -556,79 SF YTD Leasing Activity: 1.43 million SF : SF % Pre-leased: % YTD Deliveries: 32,8 SF Asking Rental Rates (Full Service) 24: $31.67 PSF 213: $42.29 PSF YTD 214: $41.67 PSF Highlights Direct vacancy in the RB-Corridor has increased from 16.5% in the second quarter 214 to 18.5% in the third quarter 214, and has increased from 14.% since third quarter 213. Total vacancy has increased from 17.1% the second quarter 213 to 19.3% in the third quarter 214, and has increased from 14.9% since third quarter 213. The RB-Corridor experienced another quarter of negative absorption, -315,459 square feet, which brings the year-to-date total to -556,79 square feet. This is the lowest absorption rate recorded since the third quarter 211. The most significant factor contributing to the negative absorption in the submarket during the third quarter was the Fish & Wildlife Service s vacating its 144,43-square-foot headquarters at 441 North Fairfax Drive and 79, square feet at 441 North Fairfax Drive as they move to 5275 Leesburg Pike in the I-395 Corridor. Other large contributions to negative absorption were the vacating of 55,579 square feet by Deliotte, along with a consolidation by Qwest at 425 North Fairfax Drive. The JBG Cos. announced that construction will begin soon on the future 552,781-square-foot CEB Tower Wilson Boulevard in Rosslyn. The building will be anchored by the Corporate Executive Board, who will be vacating their current space nearby at 1919 North Lynn Street. CEB will occupy the first floor through the twentieth floors, leaving floors available for lease. The RB-Corridor recorded the two largest sales transactions to transpire during the third quarter 214. Rockpoint Group and MRP Realty sold 131 North Courthouse Road, located in the Courthouse micro-market, for $134.1 million or $353 psf. Skanska sold 1776 Wilson Boulevard to Invesco Advisers for a price of $9.3 million or $652 psf. Neil Alt Correll Caulfield Elaine Clancy Tom Colicchio Chris Dyson Erin Jones Eamon McCrann Doug McLearn Stoddie Nibley Jed Prossner Jack Redmond

21 RB Corridor 3rd quarter 214 Major Leases CEB Tower 121 Wilson Boulevard CEB 348,847 sf Pre-lease Sequoia Plaza Washington Boulevard Arlington County Human Services 217,482 sf /Consolidation 131 North Courthouse Road GSA-DHS 71,27 sf Twin Tower South 1 Wilson Boulevard Politico 6,749 sf 1525 Wilson Boulevard Accenture 4, sf Rosslyn Plaza North 1777 North Kent Street Ballston Point 43 Wilson Boulevard Colonial Place III 217 Wilson Boulevard Rosslyn Building East 191 North Moore Street 41 North Fairfax Drive Nathan Associates 29,7 sf Hanover research 23,564 sf In-Q-tel 22,81 sf Extension Hearth, Patio & BBQ Association 17, sf Sotera Defense 16,879 sf Sales 131 N Courthouse Road Date Sold: Sep-214 Price: $134,1, ($353 psf) Buyer: AEW Capital Seller: Rockpoint Group/MRP Realty Class: Class B Occupancy: 98% 1776 Wilson Boulevard Date Sold: Jul-214 Price: $9,3, ($652 psf) Cap Rate: 5.1% Buyer: Invesco Advisers Seller: Skanska USA Class: Class A Occupancy: 83% There were no new construction starts in the Rosslyn-Ballson Corridor submarket during the third quarter 214.

22 Reston-Herndon Market Spotlight 3Q Vacancy Rate (%) Asking Rate ($) Deliveries Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption Market Stats 1 Year Averages (24-213) Total Absorption: 554,197 SF/YR Total Leasing Activity: 2.7 Million SF/YR Deliveries: 413,345 SF/YR Inventory: 29.9 Million SF Direct Vacancy: 11.8% Total Vacancy: 13.% YTD Absorption: 63,272 SF YTD Leasing Activity: 1.14 Million SF : SF % Pre-leased: % YTD Deliveries: SF Asking Rental Rates (Full Service) 24: $24.67 PSF 213: $27.53 PSF YTD 214: $27.94 PSF Highlights Direct vacancy has increased from 11.2% in the second quarter 214 to 11.8% in the third quarter 214, and has decreased from 12.2% since third quarter 213. Total vacancy has increased from 12.9% from the second quarter 214 to 13.% the third quarter 214, and has decreased from 13.7% since third quarter 213. There were 47,92 square feet of positive absorption recorded during the third quarter, which brings the year-to-date total to 63,272 square feet, an increase from 15,352 square feet at the end of the second quarter 214. Significant contributions to this increase came from occupancies at Commerce Metro 6 by Young America s Foundation for 25,285 square feet and by Appian Corporation for 54,817 square feet at Democracy Tower. This positive drive was blunted in part by a 42,727-square-foot move-out by British Telecom at 1144 Commerce Park Drive. One of the largest sales transactions of the quarter occurred at Parkridge Center Parkridge Boulevard. The building was sold by Transwestern Investment Management and Diversified International Partners to TA Associates Realty for $23,25,, or $214 per square foot. The building had previously sold for over $2 million less in 25; this sale price increase can be partially explained by the delivery of the Silver Line metro, which has helped to increase property values in the Reston/Herndon submarket. Neil Alt Correll Caulfield Elaine Clancy Tom Colicchio Chris Dyson Erin Jones Eamon McCrann Doug McLearn Stoddie Nibley Jed Prossner Jack Redmond

23 Reston-herndon 3rd Quarter 214 Major Leases Sunrise Plaza Sunrise Valley Drive Reston Arboretum 127 Sunrise Valley Drive Campus Pointe 188 Campus Commons hcentive 22,73 sf Billy Casper Golf 18,774 sf American Security Programs 14,963 sf Sublet Campus Pointe 188 Campus Commons Two Freedom Square Freedom Drive Dulles Corner Dulles Corner Drive Content Analysis 14,18 sf Echo36 13,752 sf Sublet Applied Engineering 1,532 sf Expansion Sales Parkridge Center Parkridge Boulevard Date Sold: Jul-214 Price: $23,25, ($214 psf) Cap Rate: 9.4% Buyer: Transwestern Investment/ Diversified International Partners Seller: TA Associates Class: Class A Occupancy: 91% There were no new construction starts in the Reston-Herndon submarket during the third quarter 214.

24 Route 28 North Market Spotlight 3Q Vacancy Rate (%) Asking Rate ($) Deliveries Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption Market Stats 1 Year Averages (24-213) Total Absorption: 172,29 SF/YR Total Leasing Activity: 513,457 SF/YR Deliveries: 152,177 SF/YR Inventory: 9.4 Million SF Direct Vacancy: 18.2% Total Vacancy: 18.9% YTD Absorption: -39,47 SF YTD Leasing Activity: 362,369 SF : 49,99 SF % Pre-leased: % YTD Deliveries: SF Highlights Asking Rental Rates (Full Service) 24: $21.28 PSF 213: $23.88 PSF YTD 214: $23.38 PSF Direct vacancy in the Route 28 North submarket has decreased from 18.8% in the second quarter 214 to 18.2% in the third quarter 214, and has increased from 18.1% since third quarter 213. Total vacancy has decreased from 19.7% in the second quarter 214 to 18.9% in the third quarter 214, and has increased from 18.4% since third quarter 213. The Route 28 North submarket experienced 73,577 square feet of positive absorption, which brings the year-to-date total to -39,47 square feet. Significant contributions to the positive absorption this quarter were made by a 14,255-squarefoot move in by Northern Virginia Community College at Signal Hill Plaza, and a 53,773-square-foot expansion by ATK at Loudoun Gateway I Business Court. The Route 28 North submarket must contend with looming increases in vacancy rates in the near future due to AOL s scheduled 161,75-square-foot move out from 227 Broderick Drive. Also, Loudoun Station Central Station Drive still does not show any pre-leasing activity, which will add a further 49,99 square feet of vacant space if not filled when it is scheduled to deliver during the fourth quarter 214. Neil Alt Correll Caulfield Elaine Clancy Tom Colicchio Chris Dyson Erin Jones Eamon McCrann Doug McLearn Stoddie Nibley Jed Prossner Jack Redmond

25 Route 28 North 3rd quarter 214 Major Leases Loudoun Gateway I Business Court ATK 72,894 sf Expansion/Extension Sales There were no buildings sold in the Route 28 North submarket during the third quarter 214. Loudoun Station Central Station Drive 49,99 sf Prelease: % Delivery: 4th Qtr 214 Developer: Comstock Partners Major None

26 Route 28 South Market Spotlight 3Q Vacancy Rate (%) Asking Rate ($) Deliveries Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption Market Stats 1 Year Averages (24-213) Total Absorption: 444,12 SF/YR Total Leasing Activity: 855,82 SF/YR Deliveries: 523, 82 SF/YR Inventory: 13.5 Million SF Direct Vacancy: 15.3% Total Vacancy: 16.% YTD Absorption: -69,42 SF YTD Leasing Activity: 263,881 SF : 3, SF % Pre-leased: 1% YTD Deliveries: 375,25 SF Asking Rental Rates (Full Service) 24: $22.18 PSF 213: $25.16 PSF YTD 214: $25.3 PSF Highlights Direct vacancy in the Route 28 South submarket has increased from 14.7% in the second quarter 214 to 15.3% in the third quarter 214, and has increased from 14.5% since third quarter 213. Total vacancy has increased from 15.4% from the second quarter 214 to 16.% in the third quarter 214, and has increased from 15.2% since third quarter 213. After a positive drive last quarter, the Route 28 South submarket experienced -84,142 square feet of negative absorption in the third quarter 214, which brings the year-to-date total to -69,42 square feet. A major contribution to the negative absorption comes from a move-out for 56,478 square feet by The Aerospace Corporation, which consolidated in their new headquarters at Lee Road. Two large sales transactions took place this quarter in the Route 28 South submarket and both involved the sale of buildings in the Avion Business Center. Hayden Real Estate Developments purchased a portfolio consisting of 145, 1452, and 147 Avion Parkway and 365 Concorde Parkway from C-III Asset Management for $46,5,, or $148 per square foot. Ritz Banc Group purchased and Avion Parkway from Starwood Capital Group for $18,275,, or $158 per square foot. Neil Alt Correll Caulfield Elaine Clancy Tom Colicchio Chris Dyson Erin Jones Eamon McCrann Doug McLearn Stoddie Nibley Jed Prossner Jack Redmond

27 Route 28 South 3rd quarter 214 Major Leases Meadows Meadow Wood Lane 1484 Conference Center Drive Corporate Pointe Park Center Drive Official Payments Corporation 43,72 sf Agilex 21,698 sf L-3 National Security Solutions 17,367 sf Park Center Drive Penrose Center I Penrose Place Wynwood I 518 Parkstone Drive Zolon Tech 13,78 sf Expansion Arete Associates 13,78 sf Blue Ridge Envisioneering 11,5 sf Sales Avion Portfolio 145, 1452, 147 Avion Parkway & 3635, 365 Concorde Parkway Date Sold: Price: Buyer: Seller: Class: Aug-214 $46,5, ($148 psf) Hayden Real Estate Developments C-III Asset Management Class A (Office)/Class B (Flex) & Avion Parkway Date Sold: Jun-214 Price: $18,275, ($158 psf) Cap Rate: 7.8% Buyer: Ritz Banc Group Seller: Starwood Capital Group Class: Class A Occupancy: 93% Westfields 485 & 487 Stonecroft Boulevard 3, sf Prelease: 1% Delivery: 1st Qtr 215 Developer: COPT Major CIA

28 Springfield Market Spotlight 3Q Vacancy Rate (%) Asking Rate ($) Deliveries Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption Market Stats 1 Year Averages (24-213) Total Absorption: 59,46 SF/YR Total Leasing Activity: 343,684 SF/YR Deliveries: 164,474 SF/YR Inventory: 6.1 Million SF Direct Vacancy: 21.5% Total Vacancy: 25.5% YTD Absorption: -54,565 SF YTD Leasing Activity: 121,16 SF : SF % Pre-leased: % YTD Deliveries: 4, SF Highlights Asking Rental Rates (Full Service) 24: $25.12 PSF 213: $28.37 PSF YTD 214: $28.94 PSF Direct vacancy in the Springfield submarket has increased from 21.3% in the second quarter 214 to 21.5% in the third quarter 214, and has increased from 17.1% since third quarter 213. Total vacancy has increased from 23.8% in the second quarter 214 to 25.5% in the third quarter 214, and has increased from 2.1% since third quarter 213. The Springfield submarket continued the negative absorption trend from last quarter, finishing with -74,176 square feet of negative absorption in the third quarter 214, which brought the year-to-date total to -54,565 square feet. Contributing to the negative absorption was a vacancy by Accenture and CTSC at 5911 Kingstowne Village Parkway for a total of 33,753 square feet. One of the largest sales transactions of the quarter occurred at 8348 Traford Lane within the Springfield Professional Park. The 28,391 square foot building was purchased by JAG Partners LLC for $4,375, in an owner/user sale from a private individual. Neil Alt Correll Caulfield Elaine Clancy Tom Colicchio Chris Dyson Erin Jones Eamon McCrann Doug McLearn Stoddie Nibley Jed Prossner Jack Redmond

29 Springfield 3rd Quarter 214 Major Leases There were no major leases in the Springfield submarket during the third quarter 214. Sales 8348 Traford Lane Date Sold: Sep-214 Price: $4,375, ($65.5 psf) Buyer: JAG Partners, LLC (Owner/User) Seller: Traford Anchor L.P. Class: Class B- Occupancy: 1% There were no new construction starts in the Springfield submarket during the third quarter 214.

30 Tysons Corner Market Spotlight 3Q Vacancy Rate (%) Asking Rate ($) Deliveries Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption Market Stats 1 Year Averages (24-213) Total Absorption: 184,851 SF/YR Total Leasing Activity: 2.1 Million SF/YR Deliveries: 131,654 SF/YR Inventory: 28.5 Million SF Direct Vacancy: 15.7% Total Vacancy: 16.6% YTD Absorption: -168,81 SF YTD Leasing Activity: 1.1 Million SF : 798,878 SF % Pre-leased: 22.8% YTD Deliveries: 524,979 SF Highlights Asking Rental Rates (Full Service) 24: $25.1 PSF 213: $3.18 PSF YTD 214: $32.13 PSF Direct vacancy in the Tysons Corner submarket has increased from 15.% in the second quarter 214 to 15.7% in the third quarter 214, and has increased from 13.2% from the third quarter 213. Total vacancy has increased from 15.7% from the second quarter 214 to 16.6% in the third quarter 214, and has increased from 14.2% since third quarter 213. The Tysons Corner submarket experienced its fourth consecutive quarter of negative absorption, recording -96,48 square feet of absorption, for a year-to-date total of -168,81 square feet. This negative trend was primarily driven by Booz Allen Hamilton, who vacated the entirety of the 129,916-square-foot Tysons Metro Center II 8255 Greensboro Drive. Despite Booz Allen Hamilton s significant move-out, the Tysons Metro Center was also the location of one of the largest leases executed during the quarter. Alarm.com relocated from 815 Leesburg Pike to Tysons Metro III 8281 Greensboro Drive for 82,758 square feet. This deal is significant as it represents a flight-to-quality by tenants moving to discounted space to be closer to the Silver Line. Neil Alt Correll Caulfield Elaine Clancy Tom Colicchio Chris Dyson Erin Jones Eamon McCrann Doug McLearn Stoddie Nibley Jed Prossner Jack Redmond

31 Tysons Corner 3rd quarter 214 Major Leases Tysons Metro Center III 8281 Greensboro Drive Crescent Plaza 77 Leesburg Park Westpark Business Park 8 Westpark Drive Greensboro Corporate Center Greensboro Drive Tysons Tower 79 Tysons One Place Shenandoah Bldg 791 Jones Branch Drive Alarm.com 82,758 sf Altegrity 45, sf GSA-DoJ 37,867 sf Primatics Financial 29,25 sf Splunk 28,254 sf Foundation DB 21,559 sf Tysons Metro Center III 8281 Greensboro Drive North Tower 1751 Pinnacle Drive Tysons Commerce Center 8219 Leesburg Pike Greensboro Station Greensboro Place Tysons Corner Office Center 83 Greensboro Drive Level 3 19,471 sf Uber 16,2 sf Merlin International 12,681 sf Kiewit Construction 1,813 sf Telesis 1,265 sf Sales Four Sevens Building 7777 Leesburg Pike Date Sold: Jul-214 Price: $16,, ($163 psf) Buyer: Bernstein Management Seller: USP Development Class: Class B Occupancy: 87% Tysons Overlook 794 Jones Branch Drive 321,965 sf Prelease: 56.5% Delivery: 4th Qtr 214 Developer: MRP Realty Major LMI The Corporate Office Tysons II 1775 Tysons Boulevard 476,913 sf Prelease:.% Delivery: 1st Qtr 216 Developer: Lerner Enterprises Major None