• Northern Virginia's office inventory continues to contract as properties are removed for redevelopment or conversion to other uses, leading to a gradual tightening of vacancy rates. • Leasing activity is concentrated in transit-oriented and defense-driven submarkets, particularly for relocations and new leases. • Trophy availability has dipped below 10%, and with no such product in the active construction pipeline, demand is expected to spread toward quality Class A options, further driving down vacancy. Northern Virginia (Fairfax Center and Fairfax City) Office market trends Fairfax experienced slight net occupancy loss this quarter, but vacancy rates declined for the second consecutive year as the market’s office inventory continues to rightsize via planned conversions and redevelopments to other uses including residential and data centers. A total of 2.7 million s.f. was removed from the supply this quarter across nine different submarkets. The trend is expected to continue into 2026 as the market’s planned redevelopment pipeline grows, standing at 13.8 million s.f. currently. From a demand perspective, private-sector leasing activity – particularly when excluding renewals – remains concentrated along the Silver Line corridor of Rosslyn to Reston and has yet to meaningfully spill over into traditional suburban business parks in Fairfax. Fairfax’s Class A availability declined by just 35,000 s.f. in 2025, reflecting tenants’ preferences for more lifestyle-oriented nodes. From an industry standpoint, defense contractors, buoyed by heightened federal spending, led leasing volume, a trend expected to continue into 2026, with upstart defense tech firms among the subsectors to watch. While occupancy rates continue to stabilize amid the rightsizing of supply, older Class A assets should see increased stability, but a clear and continued preference for high-quality locations and amenitized assets will continue to tilt demand in favor of other regions. Fairfax has no office availability that was developed in the 2010s or later, driving high-end relocating tenants to pockets like Reston, National Landing and Ballston which still have some degree of availability in high-end Class A or Trophy assets. Outlook Tailwinds are growing for the Northern Virginia office market, but benefits will be disparate and determined by location and asset quality. Surging defense budgets are creating expansionary demand among aerospace andv defense companies clustered in Northern Virginia, but many of these tenants own their own spaces, and leasing demand has been concentrated in upgraded buildings within mixed-use, transit-oriented hubs, while traditional suburban business parks have seen more stagnant demand. As demand continues to trickle down from the best available locations, Class A buildings in relatively strong locations or with relatively strong amenity programs relative to their peers will be the top recipients of spillover demand. MUST's Submarkets Overall market statistics Forecast 2025 net absorption (s.f.) -1,813,304 Under construction (s.f.) 35,000 Total vacancy (%) 22.8% Sublease vacancy (s.f.) 1,361,051 Asking rent (US$ p.s.f.) US$36.71 Concessions Stable Net Absorption and Overall Vacancy Rates Gross Leasing Activity Rental Rates and Going-in Yields CBD Class A cap rate (%) Cap rate Asking rent 0.2 0.1 0.0 -0.1 -0.2 -0.3 -0.4 -0.5 9% 8% 7% 6% 30% 25% 20% 15% 10% 5% 0% $34 $33 $32 $31 $30 $29 $28 $27 $26 $25 2010 2014 2018 2012 2016 2020 2022 2024 Fairfax Center and Fairfax City Rest of Market 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 10.1M 10.5M 11.3M 9.5M 8.3M 8.3M 8.3M 5.7M 6.7M 7.1M 0.3M 0.8M 0.6M 0.4M 0.4M 0.2M 0.6M 0.2M 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Net absorption (m.s.f.) Total vacancy (%) 0.4M 0.6M INDEPENDENT MARKET REPORT By JLL as at 31 December 2025 / 42 / EXPANDING HORIZONS
RkJQdWJsaXNoZXIy NTM2MDQ5