A brand new report reveals simply how a lot the COVID-19 pandemic has impacted the workplace market in Loudoun County, Va., simply exterior of D.C.—and the way a lot it is going to proceed to take action.
“Relative to other markets nationally and regionally, the Loudoun market, at 7.78 percent vacancy, is tight with little additional office inventory under construction,” David W. Parker, principal of Parker Actual Property Advisors and creator of a brand new Q3 report, advised Industrial Observer. “However, demand is slowing. Net absorption for the third quarter was negative in four of the five Loudoun submarkets, which is atypical.”
Furthermore, emptiness on the finish of Q3 was 41 foundation factors lower than on the finish of Q3 2019, however the year-over-year numbers have much less which means given COVID-19, Parker mentioned.
“The most notable trend is in deal volume,” Parker mentioned “The third quarter witnessed a 48 percent decline from the 20-year quarterly average, which is significant; this level of activity mirrors the deal volume experienced during the Great Recession. The slowdown in the number of deals completed suggests, unsurprisingly, that tenants are taking a long look at their own businesses before signing a new lease.”
Leesburg, with a emptiness charge of 4.1 % on the finish of Q3, continues to outperform the opposite submarkets particularly and the area typically. Parker famous that is much more true when trying on the efficiency of the 164 buildings which can be smaller than 10,000 sq. ft within the Leesburg submarket. On the finish of the quarter, emptiness in that phase sat at 3.eight %.
“The reasons for the submarket’s superior performance include an alignment between the average size of business in Loudoun—which is smaller than 3,000 square feet—and the size of the buildings and floorplates to accommodate these smaller users,” Parker mentioned. “For example, in Leesburg the average floorplate size is just over 2,100 square feet. The scale, walkability and presence of shops and restaurants make it a terrific environment, perfect for live/work/play.”
Parker famous the upcoming election can have a big effect on what’s to come back.
“Another data set we track is the spread between the amount of space that can be occupied immediately and space in suites that is being marketed but still occupied,” he mentioned. “That spread is narrowing just as it did in 2008. Leasing typically slows in the fourth quarter of election years by 49 percent compared to the 20-year average. If this trend continues, there will be relatively little deal velocity in the market in the coming 90 days.”
Additional out, Parker Actual Property Advisors forecasts that one can anticipate Loudoun workplace emptiness to double by the tip of 2021, predicting a spread between 13.5 to 17 % primarily based on assumptions concerning will increase within the variety of enterprise bankruptcies and choices by agency house owners to downsize their workplace footprint.
“In turn, we expect rents to fall by 7 to 10 percent, however impacts in Sterling and along Route 28 are likely to be more severe,” Parker mentioned. “In previous economic downturns—when rents in the western Fairfax submarkets like Herndon, Chantilly, and Westfield became competitive with Loudoun rents—tenants moved east. I anticipate that we will see this repeated in this cycle.”