Construction has picked up in the Route 7 Corridor Submarket after a lull from 2010–2012. More than 450,000 SF delivered from 2013–2017, hitting a peak last year, when more than 160,000 SF completed. While no projects are expected to deliver this year, there is about 82,000 SF under construction and anticipated to deliver in 2019. Deliveries of this magnitude are still well below those in construction-heavy submarkets, but the new product is not inconsequential in a submarket that doesn’t typically host much construction.
Demand has consistently outpaced supply here; at about 7%, vacancies are half their 2011 rate and well below the metro average. Some of this growth might stem from the submarket’s proximity to Leesburg, which experienced one of the highest population growth rates in the D.C. metro. Rents, however, have not benefited much from tightening vacancies: They increased modestly in 2015 and recorded the strongest gains of the cycle in 2016 but have sputtered since. At just over $27/SF, rents are just nearing the prerecession peak and rank in the bottom half of D.C. submarkets. On the bright side, low rents make this an affordable submarket for office space. Despite somewhat mixed fundamentals, sales volume in 2016—at about $99 million—set a record, although one sale comprised almost half of the volume. The momentum did not carry over into 2017, when only about $28 million in sales occurred. Slow sales have continued this year as well—as of mid-October, less than $18 million had recorded.
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