Rosslyn-Ballston Corridor Overview Q1 2019

Rosslyn, Virginia skyline

Ballston Submarket Overview

Ballston has historically been able to attract tenants in various industries, ranging from government and major public companies to smaller firms because of its highly accessible regional location. But a spate of recent tenant relocations has driven negative absorption and rising vacancy. Consequently, rent growth was minimal from 2012–17, with losses in three of those six years, and losses have continued this year. After a long pause in construction, Shooshan Co. broke ground on 4040 Wilson Blvd. in early 2018, a project that will include a mix of office, residential, and retail. Investors have maintained an interest in Ballston, and while volume has declined since 2015, Two Liberty Center sold in November 2017 for more than $72 million.

Clarendon/Courthouse Submarket Overview

Wedged between Rosslyn and the Ballston and Virginia Square Submarkets, Clarendon/Courthouse is more often thought of as residential area than a business center. However, the submarket has more than 6 million SF of inventory and is home to a host of government tenants and contractors. The submarket has two Metro stops along the central stretch of the Rosslyn-Ballston Corridor, and a heavier concentration of retail and residential uses than Rosslyn and Ballston.

Fundamentals suffered significantly in 2015, with several notable tenant move-outs sending vacancies above 15% and causing rents to decline. Demand has rebounded since, though, and vacancies are now back below the metro average. The drop in vacancies allowed rents to recover slightly from 2016–17, but consistent, meaningful gains are elusive here, as demonstrated by the drop in rents through the first three quarters of 2018. Office deliveries have been relatively muted here—with the exception of a 175,000-SF property that completed this year, the last deliveries were in 2014. As of early 18Q4, there were no projects under construction. Sales were strong in Clarendon/Courthouse from 2014–15, with more than $200 million in sales each year. Volume dropped for several years after, but rebounded in 2018—as of early October, volume was at about $164 million.

Rosslyn Submarket Overview

BRAC, sequestration, and Arlington County’s reluctance to offer competitive incentives to potential employers contributed to the massively negative absorption in the early and middle years of this cycle, as well as to the persistently high vacancy today. But Nestlé’s move into Monday Properties’ 1812 North Moore St., which brought 750 jobs to the submarket, was a huge win. It also put a dent in vacancy, which has decreased steadily since peaking in 2014. And in April 2018, Deloitte announced expansion plans, taking 115,000 SF at Waterview Tower, space formerly occupied by CEB.

The submarkets high vacancy rate still weighs on rents, which have struggled to find meaningful growth since the early years of the cycle. Despite these woes, investors haven’t backed out of Rosslyn, still finding appeal in the submarket’s Metro accessibility and proximity to an educated workforce. Volume surpassed $702 million in 2017—nearly twice the two previous years’ total. While sales this year are not on pace to match those in 2017, they’ve still been solid; as of early October, volume was at $350 million, though it was the result of just a couple of transaction.

North Arlington/East Falls Church

Virginia Square

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