Leesburg/West Loudon has experienced continuous positive absorption since 2011, helping compress vacancies from above 20% in 2010 to the single digits. Most demand has stemmed from small-block office space users, such as information technology and software companies and medical office users. Despite some of the lowest vacancies in the D.C. metro, the submarket faces heightened competition from properties in the neighboring towns of Ashburn and Sterling, which has weighed on rent growth. Construction was strong in 2015–16 and picked up again this year after a lull in 2017. Sales in 2016 provided a bright spot for the submarket, with volume hitting a record $54 million. Activity slowed again in 2017, but as of mid-October, volume in 2018 had surpassed 2017’s level.
Few large tenants exist in the Leesburg/West Loudoun Submarket, since most of the office space caters to suburban residents and includes businesses like banks, doctors, lawyers, and financial advisors. In fact, only nine tenants occupy more than 20,000 SF, and only two of those occupy more than 50,000 SF. Some of this is a result of availability: Leesburg/West Loudoun has a relatively small inventory, and more than three-quarters of it consists of 1 & 2 Star assets that average less than 7,000 SF. The median new lease signed since 2017—at about 1,100 SF—is indicative of the submarket’s office needs. The completion of phase two of Metro’s Silver Line, slated for 2020, could create additional demand for the submarket. Although the Metro won’t reach Leesburg, a short drive to Ashburn will put dense population centers like Reston and Tysons Corner within reach via public transit.
At less than $27/SF, rents in Leesburg/West Loudoun are in the bottom half of submarkets in the D.C. metro. Rents here are comparable to those in the neighboring Route 28 Corridor North and South submarkets, but those in Herndon are significantly higher. This can be partly attributed to a different inventory mix—4 & 5 Star assets make up roughly 60% of stock in Herndon, while they comprise only about 15% in Leesburg/West Loudoun.
Despite a steep decline in vacancies, rent growth has struggled. After reaching a cyclical peak of almost 4% in 2013, growth slowed, staying relatively flat in the years since. Rents levels jumped again in 2016, increasing by about 3.5%, but this proved to be an anomaly, as growth dropped to less than 1% last year and has been essentially flat in 2018. Unfortunately, there are few drivers capable of spurring a turnaround outside of the expansion of the Silver Line.