Quarterly Market Report

Northern Virginia Quarterly Market Report

4th Quarter 2018

lpcwashingtondc.com Northern Virginia Leasing & Market Research

Neil Alt Senior Vice President [email protected] | 703.284.5868

Doug McLearn Senior Vice President [email protected] | 703.284.5862

Chris Dyson Table of Contents Senior Vice President [email protected] | 703.284.3633

Eamon McCrann Metropolitan D.C. Market Overview...... 3 Senior Vice President Northern Virginia Quarterly Overview...... 5 [email protected] | 703.284.5861

Northern Virginia Top Ten Leases...... 8 Jae Lee Senior Vice President Northern Virginia Sales Transactions...... 9 [email protected] | 202.513.6700

Stoddie Nibley Market Spotlight, 4Q 2018: Vice President [email protected] | 703.284.5884 Northern Virginia...... 11 Alexandria...... 13 Correll Caulfield Vice President Crystal City...... 15 [email protected] | 703.284.5886 Fairfax...... 17 Jed Prossner Loudoun County...... 19 Vice President [email protected] | 703.284.5864 Merrifield...... 21 Stoddie Nibley Old Town Alexandria / Eisenhower Avenue...... 23 Vice President Reston - Herndon...... 25 [email protected] | 703.284.5884

Rosslyn - Ballston Corridor...... 27 Luke Joyce Associate Vice President Route 28 North...... 29 [email protected] | 703.284.3376 Route 28 South...... 31 Mary Fitzgerald Springfield...... 33 Senior Associate [email protected] | 703.284.5881 Tysons Corner...... 35r 13 Jack Redmond Senior Associate [email protected] | 703.284.5880

Ben Hickey Leasing Associate [email protected] | 703.284.3364

Ben Gallucci Market Research Associate [email protected] | 703.288.3635

Sarah Casserly Market Research Associate [email protected] | 703.288.3354 2 Metropolitan D.C. Market Overview 4th Quarter 2018

Overall Market Summary

The Washington, DC Metropolitan commercial real estate market is comprised of approximately 421.5 million square feet of rentable office space located in the District of Columbia, Northern Virginia, and Suburban Maryland. totaling 675,274 square feet, delivered. The largest addition was 1301 Pennsylvania Avenue. NW The total vacancy rate decreased to 14.0% at the delivering 283,550 square feet, 70% pre-leased to end the fourth quarter 2018, down from 14.4% at Kirkland & Ellis. the end of the third quarter. The market recorded 725,507 square feet of net absorption in the fourth There were twenty-eight sale transactions in the quarter, representing an 67.0% increase from the fourth quarter, totaling $2.60 billion. The largest sale previous quarter. was in the District with 1111 Pennsylvania Avenue, NW trading for $338,000,000 ($1,002 psf). Leasing activity for the quarter totaled 7.1 million square feet. The largest lease executed was a Average asking rental rates increased $0.04 to $37.49 renewal by Fannie Mae for 379,000 square feet at per square foot, Full Service. 11600 American Dream Way in Reston, VA. From November 2017 - November 2018 the At the end of the quarter, there was 7,626,007 Washington, DC Metropolitan area had a net square feet under construction, with 64% of the increase of 54,100 jobs (49,900 private sector, 4,200 space pre-leased. Four buildings, totaling 1,624,960 government) representing 1.6% growth, while the square feet, broke ground; while five buildings, unemployment rate decreased to 3.0%.

Metro DC VA MD Area (YTD)

Direct Vacancy 10.3% 14.3% 13.1% 13.2% (4Q 2018)

Total Vacancy 11.0% 15.0% 13.8% 14.0% (4Q 2018)

Total Net Absorption -59,391 1,389,691 568,496 1.9 M SF (YTD 2018)

Leasing Activity 9,766,265 13,409,850 3,480,051 26.7 M SF (YTD 2018)

Outlook

The fourth quarter capped a strong end to 2018 Looking ahead to 2019, the news that Crystal for the Metropolitan Washington, DC market. City was awarded half of Amazon’s coveted Market fundamentals continued to improve HQ2 requirement will have significant impacts throughout the year with total vacancy decreasing on Northern Virgina. A substantial boon to to 14.0% (down from 15.0% YE 2017) and total employment, leasing, real estate development, leasing activity experienced a 1.9% uptick with infrastructure, and higher education is expected 26.7 million square feet leased (26.2 M sf leased to occur in Arlington and Alexandria. Concerning in 2017). Investment sales increased 4.0% in Government leasing, the GSA will continue 2018 with $7.62 billion in transactions. While reducing the federal real estate footprint and the region absorbed 1.9 million square feet (1.4 begin to execute longer lease terms (15-20 year M sf in Northern Virginia alone), net absorption terms) while minimizing/eliminating short-term for the market overall was down 24% compared extensions to reduce costs. Proximity to Amazon to the previous year. Regional employment and the new Metro stations for Phase II of the experienced 1.6% of growth YOY, while the DC Silver Line in Virginia and the Purple Line in Metro area’s unemployment rate decreased to Maryland should continue to be a catalyst for 3.0% (the national average is 3.9%). The DC Metro demand (leasing and sales). remained tied in 15th place in national ranking for unemployment in metro areas with populations over 1 million.

Market Summary

The Northern Virginia office market consists of 4Q 2018 3Q 2018 4Q 2017 1,534 buildings over 25,000 square feet, totaling approximately 188.3 million square feet of rentable space. Direct 14.3% 14.5% 15.4% The largest non-GSA lease signed during the Vacancy fourth quarter was a 379,000-square-foot renewal by Fannie Mae at Fannie Mae Complex - 11600 Total American Dream Way. 15.0% 15.4% 16.2% Vacancy The largest lease signed by the GSA was a 190,546-square-foot renewal for the Patent & Net Trademark Office at Randolph Square - 2800 S. 1,389,691 898,246 1,079,887 Absorption Randolph Street. SF SF SF (YTD) Building sales volume totaled $763,384,101 during the fourth quarter. The largest transaction was Leasing the partial interest transfer of the Rockpoint/ Activity 13.4 M SF 10.0 M SF 13.2 M SF Brandywine Portfolio in the Reston-Herndon (YTD) submarket. Brandywine Realty Trust formed a joint venture with Rockpoint Group who purchased 85% Under 1.8 M SF 1.1 M SF 2.5 M SF interest in the portfolio while Brandywine retained Construction 15% interest. The buildings were 85.7% occupied at the time of sale. The second largest sale was of 1550 & 1560 Wilson Boulevard in the Rosslyn-Ballston Deliveries 1,675,000 1,575,000 2,824,691 Corridor submarket. Empire Leasing, Inc. acquired (YTD) SF SF SF the building from Brookfield Office Properties, Inc. for $102,500,000 ($364 psf). The buildings were 76.0% occupied at the time of sale and traded at $33.00 $33.20 $32.76 a 6.10% Cap Rate. The third largest sale was of Rental Rates PSF PSF PSF Building C-2- 22001 Loudoun County Parkway. Boyd Watterson acquired the building from American Real Estate Partners for $65,500,000 U/C Percent ($143 psf). The building was fully occupied at the 62.1% 35.7% 68.8% time of sale. Pre-Leased

Inside the Beltway, there were 44 buildings marketing 50,000 square feet or greater of contiguous space available at the end of the fourth quarter 2018, compared to 46 from the third quarter 2018. Outside the Beltway, there were 76 buildings marketing 50,000 square feet or greater of contiguous space available at the end of the fourth quarter 2018, compared to 78 from the third quarter 2018.

Vacancy Rate Deliveries vs. Under Construction Total vacancy in Northern Virginia decreased from 15.4% in the third quarter 2018 to 15.0% in the fourth

quarter 2018, and has decreased from 16.2% since 4.8 fourth quarter 2017. At the end of the fourth quarter

2018, 28.0 million square feet was vacant and available. 3.6

Direct vacancy decreased from 14.5% in the third SF (Millions) 2.4 quarter 2018 to 14.3% in the fourth quarter 2018, and

has decreased from 15.4% since fourth quarter 2017. At 1.2 the end of the fourth quarter 2018, 27.0 million square

feet was vacant and available for direct lease. 0.0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18

The sublet vacancy rate in Northern Virginia decreased Deliveries Under Construction slightly from 0.8% in the third quarter 2018 to 0.7% in the fourth quarter 2018, and has decreased slightly from 0.8% since fourth quarter 2017. At the end of the fourth quarter 2018, 1.0 million square feet was vacant and available for sublease. Deliveries | Net Absorption | Vacancy Rate

Total vacancy for Class A product in Northern Virginia was 16.0% while Class B product was 13.4% for the quarter. Class A vacancy decreased from 16.6% in the 6 20 18 third quarter 2018, while Class B vacancy decreased 5 16 slightly from 13.5% in the third quarter 2018. 4

14 (%) Rate Vacancy

3 12 Absorption & Gross Leasing 2 10 SF (Millions) 8 Northern Virginia recorded 491,445 square feet of 1 6 net absorption in the fourth quarter of 2018, bringing 0 total to 1,389,691 square feet year-end absorbed. A 4 -1 significant contributor to the positive absorption was 2 -2 0 a 226,492-square-foot move-in by Amazon Web '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 Services at One Dulles Tower - 13200 Woodland Park Delivery Net Absorption Direct Vacancy Rate Road.

Leasing activity at the end of the fourth quarter 2018 totaled 13,409,850 square feet, which is a 1.3% increase Vacancy by Building Class from the 13,237,848 square feet leased through the fourth quarter of 2017. Eight of the top ten leases signed in the fourth quarter were by private sector 35 20 tenants. 30 16.0% 17 Class VacantBuilding of (%) The ten largest leases signed during the fourth quarter 25 13.4% ranged in size from 379,000 square feet to 63,332 14 20 square feet, five of these largest transactions were

SF (Millions) 15 renewals. 11

10 6.8% The Rosslyn-Ballston Corridor submarket recorded 8 the strongest absorption of the quarter with 170,660 5 square feet absorbed. The positive absorption for the 0 5 quarter was driven by a 38,000-square-foot move-in A B C by Cerner at 1812 N. Moore Street.

101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.6700 lpcwashingtondc.com 6 1530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600 8120 Woodmont Ave., Suite 560 | Bethesda, MD | 301.304.8300 Northern Virginia 4th Quarter 2018 Construction Outlook A total of six buildings were under construction in The fourth quarter 2018 was dominated by the Northern Virginia at the end of the fourth quarter, private sector. Eight of the top ten leases signed in totaling approximately 1.8 million square feet. the fourth quarter were by private sector tenants.

3000 Potomac Avenue delivered this quarter in Building off of last quarter’s momentum, demand Crystal City. The 100,000-square-foot building is continued to climb as 13.4 million square feet was fully occupied by NIB and Kaiser Permanente. leased, which is a 1.3% increase from the 13.2 million square feet leased one year ago. Coupled with Buildings scheduled to deliver in 2019 include; strong absorption numbers, increased demand also Boro Loft - 1640 Boro Place, a 143,606-square- caused the total vacancy to drop from 16.2% at the foot building and the 438,169-square-foot Boro end of 2017 to 15.0% year-end 2018. Tower - 8350 Broad Street, which is currently 72.7% pre-leased by Tegna, Hogan Lovells, KPMG, The Northern Virginia market experienced a big win as and Womble Bond Dickerson. Both buildings are Amazon announced plans to split its highly coveted in the Tysons Corner submarket. Also, scheduled second headquarters known as HQ2 between to deliver in 2019 is 4040 Wilson Boulevard in the Crystal City in Northern Virginia and the Long Island Rosslyn-Ballston Corridor submarket. The building City neighborhood of Queens, New York. Amazon is 51.3% pre-leased to Avalon Bay and Vida Fitness. will invest $2.5 billion, creating 25,000 new jobs and requiring four million square feet of commercial Buildings scheduled to deliver in 2020 include; space. In a related announcement, Virginia Tech Reston Station - Phase II - 1906 Reston Metro revealed plans for a $1 billion innovation campus to Plaza. The 186,457-square-foot building is 0.0% be constructed across Route 1 from Potomac Yard pre-leased delivering in 2020. Also, scheduled to in Alexandria, roughly 2 miles from the core HQ2 deliver in 2020 is 6595 Springfield Center Drive. campus. The 625,000-square-foot building is 100% pre- leased to GSA-TSA. The Northern Virginia region gained 16,000 net new jobs from November 2017- November 2018, Buildings scheduled to deliver in 2021 include; representing 1.1% growth YOY. Professional & Alexandria Gateway O2 - 4600 King Street. The Business Services lead the private sector with 58,460-square-foot building is 0.0% pre-leased 8,300 new jobs; while the government lost 9,800. delivering in 2021. As of November 2018, the unemployment rate for Northern Virgina decreased to 2.3% compared to 2.6% the prior year. The national unemployment rate increased to 3.9%.

Top Ten Leases

Included in the top ten leases of the fourth quarter 2018 were five renewals, one renewal/downsize, one relet, one new lease, one expansion/extension, and one pre-lease. The largest lease transaction of the quarter was a 379,000-square-foot renewal signed by Fannie Mae at Fannie Mae Complex - 11600 American Dream Way in the Reston-Herndon submarket. The second largest lease of the quarter was a 190,546-square-foot renewal signed by GSA-Patent & Trademark Office at Randolph Square - 2800 S. Randolph Street in the Alexandria submarket. The third largest lease of the quarter was a 168,000-square-foot pre-lease by KPMG at Boro Tower - 8350 Broad Street. BAE Systems signed a 133,183-square-foot relet at 2941 Fairview Park Drive in the Merrifield submarket. USPS renewed 115,747 square feet at International Place - 1735 N. Lynn Street in the Rosslyn-Ballston Corridor submarket. IAI signed a 104,413-square-foot expansion/extension at Mission Ridge 1 - 15020 Conference Center Drive in the Route 28 South submarket. Deltek also signed a 93,078-square-foot renewal/downsize at 2291 Wood Oak Drive in the Reston-Herndon submarket. WeWork signed a new lease for 83,294 square feet at Central Place - 1201 Wilson Boulevard in the Rosslyn-Ballston Corridor submarket. GSA renewed for 64,912 square feet at Crystal Gateway 4 - 200 12th Street S. in the Crystal City submarket. Finally, National Cooperative Bank renewed for 63,332 square feet at Crystal Park One - 2011 Crystal Drive.

11600 American Dream Fannie Mae Complex Randolph Square 2800 S. Randolph Street Way GSA - Patent & Tenant Fannie Mae Tenant Trademark Office Size 379,000 SF Size 190,546 SF Type Renewal Type Renewal

Boro Tower 8350 Broad Street 2941 Fairview Park Drive

Tenant KPMG Tenant BAE Systems

Size 168,000 SF Size 133,183 SF

Type Pre-Lease Type Relet

15020 Conference International Place 1735 N. Lynn Street Mission Ridge 1 Center Drive Tenant USPS Tenant IAI Size 115,747 SF Size 104,413 SF Type Renewal Type Expansion/Extension

2291 Wood Oak Drive Central Place 1201 Wilson Boulevard Tenant Deltek Tenant WeWork

Size 93,078 SF Size 83,294 SF Type Renewal/Downsize Type New

Crystal Gateway 4 200 12th Street S. Crystal Park One 2011 Crystal Drive Tenant GSA National Cooperative Tenant Size 64,912 SF Bank Type Renewal Size 63,332 SF Type Renewal

Northern Virginia Sales Transactions

Rockpoint/Brandywine Portfolio 1550 & 1560 Wilson Boulevard 22001 Loudoun Shirlington 2800 S. Building C-2 Rosslyn-Ballston County Parkway Gateway Shirlington Road Submarket Reston-Herndon Submarket Corridor Submarket Route 28 North Submarket Alexandria Date Sold December-2018 Date Sold November-2018 Date Sold November-2018 Date Sold October-2018 $312,000,000 $102,500,000 Price Price $65,500,000 $40,800,000 ($285 psf on 85%) ($364 psf) Price Price ($143 psf) ($198 psf) Brandywine Empire Leasing, Buyer Buyer Boyd Watterson Monday Buyer Realty Trust/ Inc. Buyer Rockpoint Group Brookfield Office Properties Seller American Real Brandywine Properties, Inc. Seller Seller Choi Companies Seller Estate Partners Realty Trust RBA 281,219 SF RBA 167,056 SF RBA 206,200 SF RBA 1,288,062 SF Class B Class A Class A Class A Occupancy 76.0% Occupancy 100.0% Occupancy 73.2% Occupancy 85.7% Cap Rate 6.10% Cap Rate 6.20% Partial Interest Transfer (85% Notes Rockpoint & 15% Brandywine)

8400 Westpark 2001 N. WillowWood III 10302 & 10304 2500 Wilson Boulevard N.A.D.A. Building Mark Center 2001 Drive Beauregard Street & IV Eaton Place Rosslyn-Ballston Submarket Corridor Submarket Tysons Corner Submarket Alexandria Submarket Fairfax Date Sold December-2018 Date Sold December-2018 Date Sold December-2018 Date Sold December-2018 $38,900,000 Price $33,700,000 $32,317,261 $32,000,000 ($376 psf) Price Price Price ($191 psf) ($135 psf) ($115 psf) Buyer Meridian Group Hanover Mark Twenty Lake Buyer Buyer Buyer Meridian Group Center LLC Management Seller TIAA Duke Realty National Seller Seller Barings RBA 103,584 SF Automobile Corporation Seller RBA 278,979 SF Class A Dealers RBA 239,945 SF Association Class A Occupancy 86.6% Class A RBA 68,115 SF Occupancy 75.8% Cap Rate 6.25% Occupancy 100.0% Class A Cap Rate 10.40% Occupancy 62.0% Notes Owner/User

Northern Virginia Sales Transactions

Spring Mall Office 6551 Loisdale 11 Canal Center 1313 Dolley Canal Center 3 4600 N. Fairfax Drive Building Court Plaza Heritage Building Madison Rosslyn-Ballston Old Town & Submarket Boulevard Submarket Springfield Submarket Corridor Eisenhower Ave Date Sold October-2018 Submarket McLean Date Sold December-2018 Date Sold December-2018 $13,341,840 Date Sold December-2018 $18,075,000 $17,150,000 Price Price Price ($186 psf) ($155 psf) ($221 psf) $13,000,000 Price Buyer Snell Properties Kaiser American Real ($246 psf) Buyer Buyer Permanente Estate Partners Caruthers CRC Companies, McCaffery Seller Buyer Seller Investcorp Property LLC Interests Seller International, Inc. RBA 143,341 SF Seller David Kohlberg RBA 113,714 SF RBA 77,553 SF Class B RBA 52,775 SF Class B Class A Occupancy 72.1% Class B Occupancy 100.0% Occupancy 100.0% Partial interest Occupancy 86.1% Notes transfer 50%

1800 Alexander Bell Drive Random Hills 11351 Random 1604 Spring Hill 1420 Beverly Road Tysons Pond II Center Hills Road Road Submarket Reston-Herndon Submarket McLean Submarket Fairfax Submarket Tysons Corner Date Sold November-2018 Date Sold November-2018 Date Sold December-2018 Date Sold October-2018 $11,200,000 $12,700,000 Price $10,200,000 $10,000,000 Price ($82 psf) Price Price ($276 psf) ($117 psf) ($147 psf) Woodside Capital Minshall Stewart Buyer True North Buyer Partners Buyer Servatek Properties Seller Colony / LNR Buyer Management General Assets, Group Seller CWCapital Seller RBA 137,121 SF Inc. Fernau LeBlanc RBA 68,226 SF Class A Seller Investment RBA 46,000 SF Class B Partners Class B Occupancy 72.1% RBA 92,780 SF Occupancy 73.9% Occupancy 100.0% Cap Rate 1.80% Class A Notes Auction Sale Cap Rate 7.00% Occupancy 85.9%

Northern Virginia 4th Quarter 2018

18 36 16

14 16 32 4.8 12 14 28 10

12 24 ($) Rate Asking 3.6 8

10 20 6 SF (Millions)

SF (Millions) 4 2.4 Rate (%) Vacancy 8 16

2 6 12 1.2 0 4 8 -2 2 4 0.0 -4 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 0 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 Deliveries Under Construction Leasing Activity Total Net Absorption Direct Vacancy Rate Total Vacancy Rate Asking Rate

Highlights Total vacancy in Northern Virginia decreased from 10 Year Averages (2008 - 2017) 15.4% in the third quarter 2018 to 15.0% in the fourth quarter 2018, and has decreased from 16.2% since Total Absorption 317,120 SF / Year fourth quarter 2017. Direct vacancy decreased from 14.5% in the third quarter 2018 to 14.3% in the fourth Deliveries (SF) 1.6 M SF / Year quarter 2018, and has decreased from 15.4% since fourth quarter 2017. Leasing Activity 12.6 M SF / Year

Northern Virginia recorded 491,445 square feet of net absorption in the fourth quarter of 2018, Market Stats bringing the year-to-date absorption to 1,389,691 square feet. A significant contributor to the positive Inventory 188.3 M SF absorption was a 226,492-square-foot move-in by Amazon Web Services at One Dulles Tower - 13200 Direct Vacancy 14.3% Woodland Park Road. Total Vacancy 15.0% Leasing activity at the end of the fourth quarter 2018 totaled 13.4 million square feet, which is a 1.3% YTD 2018 Absorption 1,389,691 SF increase from the 13.2 million square feet leased through the fourth quarter of 2017. Eight of the top ten leases signed in the fourth quarter were by YTD Leasing Activity 13.4 M SF private sector tenants. Under Construction 1.8 M SF Inside the Beltway, there were 44 buildings marketing 50,000 square feet or greater of Percent Pre-Leased 62.1% contiguous space available at the end of the fourth quarter 2018, compared to 46 from the third YTD 2018 Deliveries 1,675,000 SF quarter 2018. Outside the Beltway, there were 76 buildings marketing 50,000 square feet or greater 2008: 2017: YTD 2018: Asking Rental Rates of contiguous space available at the end of the $31.89 $32.76 $33.00 (Full Service) fourth quarter 2018, compared to 78 from the third PSF PSF PSF quarter 2018.

Under Construction

Property Submarket Building Size Available Pre-Leased Delivery Date Developer Major Tenants Tegna, Hogan Boro Tower Lovells, KPMG, Tysons Corner 438,169 SF 119,513 SF 72.7% 1Q 2019 Meridian 8350 Broad Street Womble Bond Dickerson

Boro Loft Tysons Corner 143,606 SF 89,824 SF 37.5% 1Q 2019 Meridian Whole Foods 1640 Boro Place

Avalon Bay & 4040 Wilson Boulevard RB Corridor 240,000 SF 116,979 SF 51.3% 4Q 2019 Shooshan Vida Fitness

Reston Station - Phase II Reston-Herndon 186,457 SF 186,457 SF 0.0% 2Q 2020 Comstock None 1906 Reston Metro Plaza

6595 Springfield Center Drive Springfield 625,000 SF 0 SF 100.0% 1Q 2020 Boston Properties GSA-TSA

Alexandria Gateway 02 Alexandria 58,460 SF 58,460 SF 0.0% 1Q 2021 Weingarten None 4600 King Street

Totals

Broke Ground 4Q 2018 683,460 SF 4th Quarter Start

Total Under Construction 1,804,234 SF

% Preleased 62.7% (Does not include condos)

Alexandria 4th Quarter 2018

0.8 25 35 1.5

0.7

20 28 0.6 1.0

0.5 ($) Rate Asking Lorem ipsum 15 21 0.4 0.5 SF (Millions) SF (Millions) 0.3 Rate (%) Vacancy 10 14

0.2 0.0

0.1 5 7

0.0 -0.5 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 0 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 Deliveries Under Construction Leasing Activity Total Net Absorption Direct Vacancy Rate Total Vacancy Rate Asking Rate Highlights Direct vacancy in Alexandria increased from 14.0% in the third quarter 2018 to 14.8% in the fourth quarter 2018, and has decreased from 19.8% since fourth quarter 2017. Total vacancy increased from 14.3% in the third quarter 2018 to 15.1% in the fourth quarter 10 Year Averages (2008 - 2017) 2018, and has decreased from 20.5% since fourth quarter 2017. Total Absorption -100,961 SF / Year

The Alexandria submarket recorded 6,713 square Deliveries (SF) 103,771 SF / Year feet of net absorption in the fourth quarter of 2018, bringing year-to-date absorption to 22,112 Leasing Activity 847,588 SF / Year square feet. Positive absorption was driven by a 64,614-square-foot move-in by National Center for Missing and Exploited Children at Carlyle Gateway I - Market Stats 333 John Carlyle Street. Inventory 17.3 M SF Three sales transactions occured in the Alexandria submarket during the fourth quarter 2018. Shirlington Direct Vacancy 14.8% Gateway - 2800 S. Shirlington Road was acquired by Monday Properties from Choi Companies for Total Vacancy 15.1% $40,800,000 ($198 psf). The building was 73.2% occupied at the time of sale. Mark Center 2001 - 2001 YTD 2018 Absorption 22,112 SF N. Beauregard Street was purchased by Hanover Mark Center LLC from Duke Realty Corporation for YTD Leasing Activity 717,953 SF $32,317,261 ($135 psf). The building was fully occupied at the time of sale. Canal Center 3 - 11 Canal Center Under Construction 58,560 SF Plaza was acquired by American Real Estate Partners from Investcorp International, Inc. for $17,150,000 Percent Pre-Leased 0.0% ($221 psf). YTD 2018 Deliveries 100,000 SF The largest lease signed in the Alexandria submarket in the fourth quarter was a 190,546-square-foot 2008: 2017: YTD 2018: renewal by GSA-Patent & Trademark Office at Asking Rental Rates $33.88 $33.82 $33.87 (Full Service) Randolph Square - 2800 S. Randolph Street. PSF PSF PSF 3000 Potomac Avenue delivered this quarter. The 100,000-square-foot building is fully occupied by NIB and Kaiser Permanente. 101 Constitution Ave., Suite 325 East | Washington D.C. | 202.513.6700 lpcwashingtondc.com 13 1530 Wilson Blvd., Suite 200 | Arlington, VA | 703.522.4600 8120 Woodmont Ave., Suite 560 | Bethesda, MD | 301.304.8300 Market Spotlight

Alexandria 4th Quarter 2018

Major Leases

Randolph Square 2800 S. Randolph Street Carlyle Overlook 2318 Mill Road

GSA - Patent & Trademark American Academy of Tenant Tenant Office Physician Assistants Size 190,546 SF Size 23,970 SF

Type Renewal Type Renewal

Calyle Tower I 2461 Eisenhower Avenue Canal Center 2 66 Canal Center Plaza

Tenant Industrious Tenant NRMCA

Size 22,314 SF Size 13,857 SF

Type Relet Type Relet Sales

Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate

Shirlington Gateway $40,800,000 Monday Choi Alexandria Oct 2018 A 73.2% N/A 2800 S. Shirlington Road ($198 psf) Properties Companies

Mark Center 2001 $32,317,261 Hanover Mark Duke Realty Alexandria Dec 2018 A 100.0% N/A 2001 N. Beauregard Street ($135 psf) Center LLC Corporation

Old Town & Investcorp Canal Center 3 $17,150,000 American Real Eisenhower Dec 2018 International, A 100.0% N/A 11 Canal Center Plaza ($221 psf) Estate Partners Ave Inc.

Under Construction

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

Alexandria Gateway O2 Alexandria 58,460 58,460 0.0% 1Q 2021 Weingarten None 4600 King Street

Deliveries

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

3000 Potomac Avenue Alexandria 100,000 0 100% 4Q 2018 NIB NIB, Kaiser Permanente

Crystal City 4th Quarter 2018

0.500 32 48 2.0

28 42 1.5

0.375 24 36 1.0 Asking Rate ($) Rate Asking 20 30 0.5

0.250 16 24 0.0 SF (Millions) SF (Millions) Vacancy Rate (%) Vacancy

12 18 -0.5 0.125 8 12 -1.0

4 6 0.000 -1.5 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 0 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 Deliveries Under Construction Leasing Activity Total Net Absorption Direct Vacancy Rate Total Vacancy Rate Asking Rate

Highlights 10 Year Averages (2008 - 2017) Direct vacancy in Crystal City decreased slightly from 17.0% in the third quarter 2018 to 16.7% in the fourth Total Absorption 12,136 SF / Year quarter 2018, and has decreased from 17.9% since fourth quarter 2017. Total vacancy decreased slightly Deliveries (SF) 75,312 SF / Year from 17.3% in the third quarter 2018 to 16.9% in the fourth quarter 2018, and has decreased from 18.3% Leasing Activity 1.0 M SF / Year since fourth quarter 2017.

The Crystal City submarket recorded 117,445 square Market Stats feet of net absorption during the fourth quarter of 2018, bringing year-to-date absorption to 342,752 Inventory 11.5 M SF square feet. The positive absorption for the quarter was driven by an 87,610-square-foot move-in by the Direct Vacancy 16.7% American Institutes for Research at 1400 Crystal - 1400 Crystal Drive. Total Vacancy 16.9% Amazon announced this quarter that they will be YTD 2018 Absorption 342,752 SF moving a portion of their HQ2 to Crystal City. They will be leasing a total of 500,000 square feet in three YTD Leasing Activity 604,951 SF existing Crystal City office buildings. The buildings include 241 18th Street S., 1800 S. Bell Street, and Under Construction 0 SF 1770 Crystal Drive. No leases have officially been signed as of 4Q 2018. Percent Pre-Leased 100.0% The largest lease signed in the Crystal City submarket in the fourth quarter was a 64,912-square- YTD 2018 Deliveries 100,000 SF foot renewal by GSA at Crystal Gateway 4 - 200 12th 2008: 2017: YTD 2018: Street S. Asking Rental Rates $37.11 $36.81 $37.87 (Full Service) 3000 Potomac Avenue delivered this quarter. The PSF PSF PSF 100,000-square-foot building is fully occupied by NIB and Kaiser Permanente.

Crystal City 4th Quarter 2018

Major Leases

Crystal Gateway 4 200 12th Street S. Crystal Park One 2011 Crystal Drive Tenant GSA Tenant National Cooperative Bank Size 64,912 SF Size 63,332 SF Type Renewal Type Renewal

2511 Jefferson Davis Two Potomac Yard 2733 Crystal Drive Presidential Tower Highway Tenant John Snow Tenant Surescripts

Size 49,787 SF Size 42,074 SF

Type Relet Type Relet

Sales

Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate

No new sales reported during the Crystal City N/A N/A N/A N/A N/A N/A N/A quarter

Deliveries

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

3000 Potomac Avenue Alexandria 100,000 0 100% 4Q 2018 NIB NIB, Kaiser Permanente

Fairfax (Fairfax Center, Fairfax City, Oakton) 4th Quarter 2018

0.20 24 30 1.5

0.16 20 25 1.0

0.12 16 20 ($) Rate Asking

0.5 12 15 SF (Millions) SF (Millions)

0.08 Rate (%) Vacancy

8 10 0.0 0.04

4 5 -0.5 0.00 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 0 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 Leasing Activity Total Net Absorption Deliveries Under Construction Direct Vacancy Rate Total Vacancy Rate Asking Rate

Highlights 10 Year Averages (2008 - 2017) Total Absorption -114,779 SF / Year Direct vacancy in Fairfax decreased from 18.3% in the third quarter 2018 to 18.2% in the fourth quarter 2018, Deliveries (SF) 28,762 SF / Year and has decreased from 18.7% since fourth quarter 2017. Total vacancy increased from 19.0% in the third quarter 2018 to 19.2% in the fourth quarter 2018, and Leasing Activity 828,954 SF / Year has decreased from 19.7% since fourth quarter 2017.

The Fairfax submarket recorded 20,614 square feet of Market Stats net absorption in the fourth quarter of 2018, bringing the year-to-date absorption to 196,728 square feet. Inventory 12.5 M SF The positive absorption for the quarter was driven by a 13,500-square-foot move-in by VMD Systems at Direct Vacancy 18.2% One Fair Oaks - 4114 Legato Road. Total Vacancy 19.2% Two sales transactions occured in the Fairfax submarket this quarter. WillowWood III & IV - 10302 YTD 2018 Absorption 196,728 SF & 10304 Eaton Place were acquired by Twenty Lake Management from Barings for $32,000,000 ($115 YTD Leasing Activity 928,493 SF psf). The buildings were 75.8% occupied at the time of sale, and traded at a 10.40% Cap Rate. Random Hills Under Construction 0 SF Center - 11351 Random Hills Road was purchased by True North Management Group from Fernau LeBlanc Percent Pre-Leased 0.0% Investment Partners for $10,200,000 ($117 psf). The building was 85.9% occupied at the time of sale. YTD 2018 Deliveries 0 SF The largest lease signed in the Fairfax submarket in 2008: 2017: YTD 2018: the fourth quarter 2018 was a 14,689-square-foot Asking Rental Rates $28.71 $26.00 $27.08 relet by AFCEA International at One Fair Oaks- 4114 (Full Service) Legato Road. PSF PSF PSF

Fairfax (Fairfax Center, Fairfax City, Oakton) 4th Quarter 2018

Major Leases

One Fair Oaks 4114 Legato Road

Tenant AFCEA International

Size 14,689 SF

Type Relet

Sales

Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate

WillowWood III & IV $32,000,000 Twenty Lake Fairfax Dec 2018 Barings A 75.8% 10.40% 10302 & 10304 Eaton Place ($115 psf) Management

Fernau True North Random Hills Center $10,200,000 LeBlanc Fairfax Dec 2018 Management A 85.9% N/A 11351 Random Hills Road ($117 psf) Investment Group Partners

Under Construction

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

No new construction reported Fairfax N/A N/A N/A N/A N/A N/A this quarter

Loudoun County 4th Quarter 2018

1.0 24 30 3.00 0.8

20 25 0.7 2.35

0.6 16 20 ($) Rate Asking 1.70 0.5 12 15 SF (Millions) Vacancy Rate (%) Vacancy SF (Millions) 0.3 1.05 8 10 0.2 0.40 4 5 0.1

-0.25 0.0 0 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 Leasing Activity Total Net Absorption Direct Vacancy Rate Total Vacancy Rate Asking Rate Deliveries Under Construction

Highlights 10 Year Averages (2008 - 2017) Direct vacancy in Loudoun County decreased slightly Total Absorption 304,621 SF / Year from 9.1% in the third quarter 2018 to 8.9% in the fourth quarter 2018, and has decreased from 11.1% since fourth 262,501 SF / Year quarter 2017. Total vacancy has decreased from 9.6% Deliveries (SF) in the third quarter 2018 to 9.3% in the fourth quarter 2018, and has decreased from 12.0% since fourth Leasing Activity 874,286 SF / Year quarter 2017. Market Stats Loudoun County recorded 51,524 square feet of net absorption in the fourth quarter of 2018, bringing the Inventory 15.3 M SF year-to-date absorption to 219,131 square feet. The positive absorption for the quarter was driven by a Direct Vacancy 8.9% 9,000-square-foot move-in by the Gravy Analytics at 45610 Woodland Road. Total Vacancy 9.3% The largest lease signed in the Loudoun submarket was an 11,961-square-foot renewal by Washington YTD 2018 Absorption 219,131 SF Radiology at Lakeside at Loudon - 21351 Ridgetop Circle. Also contributing to leasing activity this quarter YTD Leasing Activity 1,005,406 SF was an 11,305-square-foot renewal by Boeing at Riverside Medical Office Building - 44084 Riverside Under Construction 0 SF Parkway. Percent Pre-Leased 0.0%

YTD 2018 Deliveries 0 SF

2008: 2017: YTD 2018: Asking Rental Rates $26.83 $24.59 $25.73 (Full Service) PSF PSF PSF

Loudoun County 4th Quarter 2018

Major Leases

Riverside Medical Lakeside at Loudoun 21351 Ridgetop Circle 44084 Riverside Parkway Office Building Tenant Washington Radiology Tenant Boeing

Size 11,961 SF Size 11,305 SF

Type Renewal Type Renewal

Sales

Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate

No new sales reported during the Loudoun N/A N/A N/A N/A N/A N/A N/A quarter County

Under Construction

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

No new construction N/A N/A N/A N/A N/A N/A N/A reported this quarter

Merrifield 4th Quarter 2018

0.30 18 40 2.0

0.25 16 35 1.5 14 30 0.20 1.0 12 ($) Rate Asking 25

0.15 10 0.5 20 SF (Millions) SF (Millions)

Vacancy Rate (%) Vacancy 8 0.10 15 0.0 6

10 -0.5 0.05 4

5 2 -1.0 0.00 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 0 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 Leasing Activity Total Net Absorption Deliveries Under Construction Direct Vacancy Rate Total Vacancy Rate Asking Rate

Highlights 10 Year Averages (2008 - 2017)

Direct vacancy in Merrifield increased from 11.4% in Total Absorption 8,167 SF / Year the third quarter 2018 to 12.7% in the fourth quarter 2018, and has increased from 10.9% since fourth Deliveries (SF) 54,733 SF / Year quarter 2017. Total vacancy has increased from 12.2% in the third quarter 2018 to 13.6% in the fourth Leasing Activity 632,336 SF / Year quarter 2018, and has increased from 11.7% since fourth quarter 2017. Market Stats The Merrifield submarket recorded 19,944 square feet of net absorption in the fourth quarter of 2018, Inventory 9.3 M SF bringing the year-to-date absorption to -6,041 square feet. Positive absorption was driven by a Direct Vacancy 12.7% 215,501-square-foot move-in by General Dynamics at 3150 Fairview Park Drive. Total Vacancy 13.6%

The largest lease signed in the Merrifield submarket YTD 2018 Absorption -6,041 SF this quarter was a 133,183 square-foot relet by BAE Systems, Inc. at 2941 Fairview Park Drive. Also YTD Leasing Activity 662,372 SF contributing to leasing activity this quarter was a 10,012-square-foot relet by Virginia Pediatric Group Under Construction 0 SF at Yorktown 50 Building - 8316 Arlington Boulevard. Percent Pre-Leased 0%

YTD 2018 Deliveries 0 SF

2008: 2017: YTD 2018: Asking Rental Rates $35.34 $31.16 $30.41 (Full Service) PSF PSF PSF

Merrifield 4th Quarter 2018

Major Leases

2941 Fairview Park Drive Yorktown 50 Bldg 8316 Arlington Boulevard

Tenant BAE Systems Tenant Virginia Pediatric Group

Size 133,183 SF Size 10,012 SF

Type Relet Type Expansion

Sales

Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate

No new sales reported during the Merrifield N/A N/A N/A N/A N/A N/A N/A quarter

Under Construction

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

No new construction reported Merrifield N/A N/A N/A N/A N/A N/A this quarter

Old Town/Eisenhower Ave 4th Quarter 2018

0.8 20 40 1.0

0.7

16 32 0.6 0.5

0.5 ($) Rate Asking 12 24 0.4 0.0 SF (Millions) SF (Millions) 0.3 Rate (%) Vacancy 8 16

0.2 -0.5

0.1 4 8

-1.0 0.0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 Leasing Activity Total Net Absorption Deliveries Under Construction Direct Vacancy Rate Total Vacancy Rate Asking Rate Highlights Direct vacancy in the Old Town Alexandria and Eisenhower Ave submarket increased from 9.8% in the 10 Year Averages (2008 - 2017) third quarter 2018 to 10.4% in the fourth quarter 2018, and has decreased from 13.8% since fourth quarter Total Absorption -26,027 SF / Year 2017. Total vacancy increased from 10.1% in the third quarter 2018 to 10.8% in the fourth quarter 2018, and Deliveries (SF) 103,771 SF / Year has decreased from 14.7% since fourth quarter 2017. Leasing Activity 660,187 SF / Year The Old Town Alexandria and Eisenhower Ave submarket recorded -9,784 square feet of net absorption in the fourth quarter of 2018, bringing year-to-date absorption Market Stats to -37,929. Negative absorption was driven by a 37,153-square-foot move-out by National Industries for Inventory 13.4 M SF the Blind at Braddock Metro Center I - 1310 Braddock Place. Direct Vacancy 10.4% One sales transaction occured in the Old Town Total Vacancy 10.8% Alexandria and Eisenhower Ave submarket during the fourth quarter 2018. Canal Center 3 - 11 Canal Center -37,929 SF Plaza was acquired by American Real Estate Partners YTD 2018 Absorption from Investcorp International, Inc. for $17,150,000 ($221 psf). The building was fully occupied at the time of sale. YTD Leasing Activity 469,169 SF

The largest lease signed in the Old Town Alexandria and Under Construction 58,460 SF Eisenhower Ave submarket in the fourth quarter was a 23,970-square-foot renewal by American Academy Percent Pre-Leased 0.0% of Physician Assistants at Carlyle Overlook - 2318 Mill Road. Additional leases signed this quarter included a YTD 2018 Deliveries 0 SF 22,314-square-foot relet by Industrious at Carlyle Tower I - 2461 Eisenhower Avenue, and a 13,857-square-foot 2008: 2017: YTD 2018: relet by NRMCA at Canal Center 2 - 66 Canal Center Asking Rental Rates $34.78 $36.52 $36.22 Plaza. (Full Service) PSF PSF PSF

Old Town/Eisenhower Ave 4th Quarter 2018

Major Leases

Carlyle Overlook 2318 Mill Road Calyle Tower I 2461 Eisenhower Avenue

American Academy of Tenant Tenant Industrious Physician Assistants Size 22,314 SF Size 23,970 SF Type Relet Type Renewal

Canal Center 2 66 Canal Center Plaza

Tenant NRMCA

Size 13,857 SF

Type Relet

Sales

Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate

Investcorp Canal Center 3 Old Town & $17,150,000 American Real Dec 2018 International, A 100.0% N/A 11 Canal Center Plaza Eisenhower Ave ($221 psf) Estate Partners Inc.

Under Construction

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

Alexandria Gateway O2 Alexandria 58,460 58,460 0.0% 1Q 2021 Weingarten None 4600 King Street

Reston-Herndon 4th Quarter 2018

2.0 25 35 4.0 3.5

1.6 3.0 20 28 2.5 Asking Rate ($) Rate Asking 1.2 2.0 15 21 1.5

SF (Millions) 1.0 Vacancy Rate (%) Vacancy

SF (Millions) 0.8 10 14 0.5

0.0 0.4 5 7 -0.5

-1.0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 0.0 0 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 Leasing Activity Total Net Absorption Direct Vacancy Rate Total Vacancy Rate Asking Rate Deliveries Under Construction Highlights Direct vacancy decreased from 13.5% in the third quarter 2018 to 12.4% the fourth quarter 2018, and has increased from 11.9% since fourth quarter 2017. Total vacancy has 10 Year Averages (2008 - 2017) decreased from 14.5% in the third quarter 2018 to 13.4% the fourth quarter 2018, and has increased from 13.3% Total Absorption 128,297 SF / Year since fourth quarter 2017. Year-to-date direct vacancy for Reston was 10.7% and total vacancy was 11.3%. Year- Deliveries (SF) 189,641 SF / Year to-date direct vacancy for Herndon was 15.3% and total vacancy was 16.9%. Leasing Activity 2.6 M SF / Year

The Reston-Herndon submarket recorded 65,057 square feet of net absorption in the fourth quarter of 2018, Market Stats bringing the year-to-date absorption to -533,674 square feet. The positive absorption for the quarter was driven Inventory 30.6 M SF by a 226,492-square-foot move-in by Amazon Web Services at One Dulles Tower - 13200 Woodland Park Direct Vacancy 12.4% Road. Total Vacancy 13.4% The largest transaction of Northern Virginia for the fourth quarter 2018 was the partial interest transfer of YTD 2018 Absorption -533,674 SF the Rockpoint/Brandywine Portfolio in the Reston- Herndon submarket. Brandywine Realty Trust formed 2.2 M SF a joint venture with Rockpoint Group who purchased YTD Leasing Activity 85% interest in the portfolio while Brandywine retained 15% interest. The buildings were 85.7% occupied at the Under Construction 186,457 SF time of sale. 1800 Alexander Bell Drive was acquired by Woodside Capital Partners from Colony/LNR for Percent Pre-Leased 0.0% $11,200,000 ($82 psf). The building was 72.1% occupied at the time of sale. YTD 2018 Deliveries 0 SF

The largest lease signed in the Reston-Herndon submar- 2008: 2017: YTD 2018: Asking Rental Rates ket in the fourth quarter was a 379,000-square-foot re- $31.03 $30.16 $31.60 (Full Service) newal by Fannie Mae at Fannie Mae Complex - 11600 PSF PSF PSF American Dream Way.

Reston-Herndon 4th Quarter 2018

Major Leases

11600 American Dream Fannie Mae Complex 2291 Wood Oak Drive Way Tenant Deltek Tenant Fannie May Size 93,078 SF Size 379,000 SF Type Renewal/Downsize Type Renewal

Reston Metro Center 12120 Sunrise Valley RTC West I 12100 Sunset Hills Road One Drive Presidio Networked Tenant Tenant Kimley Horn Solutions Size 53,384 SF Size 35,689 SF Type Relet Type Relet

Worldgate Metro 13241 Woodland Park 12825 Worldgate Drive Northridge II Plaza III Road Tenant Bohler Engineering Tenant L2T

Size 24,106 SF Size 23,738 SF

Type Relet Type Relet

Dulles View South 2553 Dulles View Drive Tenant Amdocs

Size 23,478 SF

Type Relet

Sales

Property Submarket Date Sold Price Buyer Seller Class Occupancy Notes

Partial Interest $312,000,000 Brandywine Realty Transfer Rockpoint/ Brandywine Reston-Herndon Dec 2018 ($285 psf on Trust/Rockpoint A 85.7% (85% Brandywine Portfolio Realty Trust 85%) Group Rockpoint & 15% Brandywine)

1800 Alexander Bell $11,200,000 Woodside Capital 1.80% Cap Reston-Herndon Nov 2018 Colony/LNR A 72.1% Drive ($82 psf) Partners Rate

Under Construction

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

Reston Station - Phase II Reston-Herndon 186,457 SF 186,457 SF 0.0% 2Q 2020 Comstock None 1906 Reston Metro Plaza

Rosslyn-Ballston Corridor 4th Quarter 2018

1.2 27 45 2.5

1.0 24 40 2.0

21 35 1.5 0.8

18 30 ($) Rate Asking 1.0 0.6 15 25 0.5 SF (Millions) SF (Millions) Vacancy Rate (%) Vacancy 12 20 0.4 9 15 0.0

0.2 6 10 -0.5

3 5 -1.0 0.0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 0 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 Leasing Activity Total Net Absorption Deliveries Under Construction Direct Vacancy Rate Total Vacancy Rate Asking Rate

Highlights 10 Year Averages (2008 - 2017) Direct vacancy in the Rosslyn-Ballston Corridor decreased from 16.9% in the third quarter 2018 to 16.5% in the fourth Total Absorption -152,877 SF / Year quarter 2018, and has decreased from 18.0% since fourth quarter 2017. Total vacancy decreased from 18.6% in the Deliveries (SF) 250,683 SF / Year third quarter 2018 to 17.8% in the fourth quarter 2018, and has decreased from 18.5% since fourth quarter 2017. Leasing Activity 2.0 M SF / Year

The Rosslyn-Ballston Corridor recorded 170,660 square feet of net absorption during the fourth quarter of 2018 Market Stats bringing the year-to-date absorption to 128,647 square feet. The primary driver for positive absorption was a Inventory 25.5 M SF 38,000-square-foot move-in by Cerner at 1812 N. Moore Street. Direct Vacancy 16.5%

The second largest sales transaction of the fourth quar- Total Vacancy 17.8% ter in Northern Virginia occurred in the Rosslyn-Ballston Corridor. 1550 & 1560 Wilson Boulevard were acquired by YTD 2018 Absorption 128,647 SF Empire Leasing, Inc. from Brookfield Office Properties for $102,500,000 ($364 psf). The buildings were 76.0% occu- YTD Leasing Activity 2.4 M SF pied at the time of sale, and traded at a 6.10% Cap Rate. 2500 Wilson Boulevard also traded this quarter. Meridian Under Construction 240,000 SF Group purchased the building from TIAA for $38,900,000 ($376 psf). The building was 86.6% occupied at the time of Percent Pre-Leased 51.3% sale and traded at a 6.25% Cap Rate. YTD 2018 Deliveries 175,000 SF The largest lease signed in the Rosslyn-Ballston Corridor submarket was a 115,747-square-foot renewal by USPS at International Place - 1735 N. Lynn Street. Another top 2008: 2017: YTD 2018: Asking Rental Rates lease in the Rosslyn-Ballston Corridor submarket this $37.77 $41.52 $42.73 (Full Service) quarter was an 83,294-square-foot new lease by WeWork PSF PSF PSF at Central Place - 1201 Wilson Boulevard.

Rosslyn-Ballston Corridor 4th Quarter 2018

Major Leases

International Place 1735 N. Lynn Street Central Place 1201 Wilson Boulevard Tenant USPS Tenant WeWork

Size 115,747 SF Size 83,294 SF

Type Renewal Type New

1812 N. Moore Street The Regent 950 N. Glebe Road Tenant Cerner Tenant Privia Health, LLC

Size 38,000 SF Size 37,192 SF

Type Relet Type Renewal/Expansion

Colonial Place II 2101 Wilson Boulevard Cooperative Plaza 4301 Wilson Boulevard Tenant Zelenick & Erickson Tenant NAMI

Size 29,934 SF Size 21,508 SF

Type Expansion/Extension Type Relet

Sales

Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate

Brookfield $102,500,000 Empire Leasing, Office 1550 & 1560 Wilson Boulevard RB Corridor Nov 2018 B 76.0% 6.10% ($364 psf) Inc. Properties, Inc.

$38,900,000 2500 Wilson Boulevard RB Corridor Dec 2018 Meridian Group TIAA A 86.6% 6.25% ($376 psf)

$13,341,840 Caruthers 4600 N. Fairfax Drive RB Corridor Oct 2018 Snell Properties B 72.1% N/A ($186 psf) Property

Under Construction

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

4040 Wilson Boulevard RB Corridor 240,000 SF 116,979 SF 51.3% 4Q 2019 Shooshan Avalon Bay & Vida Fitness

Route 28 North 4th Quarter 2018

0.6 25 30 3.00

0.5 20 24 2.35

0.4 Asking Rate ($) Rate Asking 1.70 15 18 0.3

SF (Millions) 1.05 Vacancy Rate (%) Vacancy SF (Millions) 10 12 0.2

0.40 5 6 0.1

-0.25 '08 '09 '10 '11 '12 '13 '13 '15 '16 '17 YTD '18 0.0 0 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 Leasing Activity Total Net Absorption Direct Vacancy Rate Total Vacancy Rate Asking Rate Deliveries Under Construction Highlights 10 Year Averages (2008 - 2017) Direct vacancy in the Route 28 North submarket remained flat at 10.8% from the third quarter 2018 to Total Absorption 117,650 SF / Year the fourth quarter 2018, and has decreased from 14.0% since fourth quarter 2017. Total vacancy remained flat Deliveries (SF) 90,108 SF / Year at 11.4% in the third quarter 2018 to the fourth quarter 2018, and has decreased from 15.0% since fourth Leasing Activity 620,599 SF / Year quarter 2017.

The third largest sales transaction of the quarter in Market Stats Northern Virginia ocurred in the the Route 28 North submarket. Building C-2 - 22001 Loudoun County Parkway was acquired by Boyd Watterson from Inventory 9.5 M SF American Real Estate Partners for $65,500,000 ($143 psf). The building was 100% occupied at time of sale. Direct Vacancy 10.8%

The largest lease signed in the Route 28 North Total Vacancy 11.4% submarket this quarter was an 11,961-square-foot renewal by Washington Radiology at Lakeside at YTD 2018 Absorption 135,376 SF Loudoun Building 1 - 21351 Ridgetop Circle. YTD Leasing Activity 792,972 SF

Under Construction 0 SF

Percent Pre-Leased 0%

YTD 2018 Deliveries 0 SF

2008: 2017: YTD 2018: Asking Rental Rates $25.41 $23.76 $25.26 (Full Service) PSF PSF PSF

Route 28 North 4th Quarter 2018

Major Leases

Lakeside at Loudoun 21351 Ridgetop Circle Building 1 Tenant Washington Radiology

Size 11,961 SF

Type Renewal

Sales

Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate

American Building C-2 $65,500,000 Real Rt 28 North Nov 2018 Boyd Watterson A 100% N/A 22001 Loudoun County Parkway ($143 psf) Estate Partners

Under Construction

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

No new construction reported Rt 28 North N/A N/A N/A N/A N/A N/A during the quarter

Route 28 South 4th Quarter 2018

1.0 25 30 1.5

0.8 20 24 1.0 Asking Rate ($) Rate Asking 0.6 15 18 0.5 SF (Millions) Vacancy Rate (%) Vacancy

SF (Millions) 0.4 10 12

0.0

0.2 5 6

-0.5 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 0.0 0 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 Leasing Activity Total Net Absorption Direct Vacancy Rate Total Vacancy Rate Asking Rate Deliveries Under Construction Highlights Direct vacancy in the Route 28 South submarket has increased from 14.1% in the third quarter 2018 to 14.6% in the fourth quarter 2018, and has increased from 11.8% 10 Year Averages (2008 - 2017) in the fourth quarter 2017. Total vacancy has decreased from 15.8% in the third quarter 2018 to 15.4% the fourth Total Absorption 222,842 SF / Year quarter 2018, and has increased from 13.0% since fourth quarter 2017. Deliveries (SF) 201,181 SF / Year

The Route 28 South submarket recorded -45,227 square Leasing Activity 815,274 SF / Year feet of net absorption in the fourth quarter of 2018, bringing the year-to-date absorption to 105,973 square feet. Negative absorption was driven by a 25,384-square- Market Stats foot move-out by Travelers Insurance at Victory Point at Westfields - 14200 Park Meadow Drive. Inventory 14.3 M SF The largest lease signed in the Route 28 South submarket Direct Vacancy 14.6% this quarter was a 104,413-square-foot expansion/ extension by IAI at Mission Ridge 1 - 15020 Conference Total Vacancy 15.4% Center Drive. Additional leases signed this quarter included a 47,456-square-foot relet by GSA-Immigration 105,973 SF and Customs Enforcement (ICE) at Stonecroft Business YTD 2018 Absorption Park-Building B - 14797 Murdock Street, and a 25,479-square-foot renewal/expansion by Noblis ESI, YTD Leasing Activity 947,288 SF LLC at Penrose Center I - 14425 Penrose Place. Under Construction 0 SF

Percent Pre-Leased 0%

YTD 2018 Deliveries 425,000 SF

2008: 2017: YTD 2018: Asking Rental Rates $28.87 $25.28 $26.61 (Full Service) PSF PSF PSF

Route 28 South 4th Quarter 2018 Major Leases 15020 Conference Stonecroft Business Mission Ridge 1 14797 Murdock Street Center Drive Park-Building B Tenant IAI GSA-Immigration and Tenant Customs Enforcement Size 104,413 SF (ICE)

Type Expansion/Extension Size 47,456 SF Type Relet

Penrose Center I 14425 Penrose Place Enterprise Center- 4100 Lafayette Center Bldg 1 Drive Tenant Noblis ESI, LLC Tenant Koniag Services Size 25,479 SF Size 12,368 SF Type Renewal/Expansion Type Renewal

Victory Point at 14200 Park Meadow Westfields Drive Tenant Alpha Industries, Inc.

Size 10,104 SF

Type Renewal

Sales

Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate

No new sales reported Rt 28 South N/A N/A N/A N/A N/A N/A N/A during the quarter

Under Construction

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

No new construction reported Route 28 South N/A N/A N/A N/A N/A N/A this quarter

Springfield 4th Quarter 2018

0.5 30 35 1.00

0.4 24 28 0.75 Asking Rate ($) Rate Asking 0.3 18 21 0.50 Vacancy Rate (%) Vacancy SF (Millions) SF (Millions) 0.2 12 14 0.25

0.00 0.1 6 7

0.0 -0.25 0 0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18

Deliveries Under Construction Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption

Highlights 10 Year Averages (2008 - 2017)

Direct vacancy in the Springfield submarket decreased Total Absorption 56,128 SF / Year from 21.6% in the third quarter 2018 to 19.5% in the fourth quarter 2018, and has decreased from 20.5% Deliveries (SF) 127,578 SF / Year since fourth quarter 2017. Total vacancy decreased from 21.9% in the third quarter 2018 to 19.6% in the Leasing Activity 309,825 SF / Year fourth quarter 2018, and has decreased from 20.7% since fourth quarter 2017. Market Stats The Springfield submarket recorded 37,795 square feet of net absorption in the fourth quarter of 2018, Inventory 6.1 M SF bringing the year-to-date absorption to 25,128 square feet. The positive absorption was driven primarily by Direct Vacancy 19.5% multiple smaller tenant move-ins. Total Vacancy 19.6% One sales transaction occured in the Springfield submarket during the fourth quarter 2018. The Spring YTD 2018 Absorption 25,128 SF Mall Office Building - 6551 Loisdale Court was acquired by Kaiser Permanente from McCaffrey Interests YTD Leasing Activity 311,731 SF for $18,075,000 ($155 psf). The building was 100% occupied at the time of sale. Under Construction 625,000 SF

The largest lease signed in the Springfield submarket Percent Pre-Leased 100.0% in the fourth quarter 2018 was a 35,219-square-foot renewal by National Technical Information Service YTD 2018 Deliveries 0 SF at Shawnee Plaza - 5301 Shawnee Road. Additional leases signed this quarter included a 28,184-square- foot relet by Bowhead at The Offices at Springfield Town 2008: 2017: YTD 2018: Asking Rental Rates Center - 6564 Loisdale Court, and a 16,049-square- $29.87 $29.76 $29.33 (Full Service) foot relet by Unisys at Kingstowne Bldg T - 5971 PSF PSF PSF Kingstowne Village Parkway.

Springfield 4th Quarter 2018

Major Leases

The Offices at Shawnee Plaza 5301 Shawnee Road 6564 Loisdale Court Springfield Town Center National Technical Tenant Information Service Tenant Bowhead Size 35,219 SF Size 28,184 SF Type Renewal Type Relet

5971 Kingstowne Village Poplar Run Office Kingstowne Bldg T 5285 Shawnee Road Parkway Park 5

Tenant Unisys Tenant E-9 Corporation

Size 16,049 SF Size 12,615 SF

Type Relet Type Relet

MetroPark 5 6363 Walker Lane

Tenant Kiewit Infrastructure Co.

Size 12,059 SF

Type Relet

Sales

Property Submarket Date Sold Price Buyer Seller Class Occupancy Cap Rate

Spring Mall Office Building $18,075,000 Kaiser McCaffrey Springfield Dec 2018 B 100% N/A 6551 Loisdale Court ($155 psf) Permanente Interests

Under Construction

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

Boston Springfield 625,000 SF 0 SF 100.0% 1Q 2020 GSA-TSA 6595 Springfield Center Drive Properties

Tysons Corner 4th Quarter 2018

2.0 20 36 3.0

2.5 30 16 1.5 2.0

24 ($) Rate Asking 12 1.5 1.0 18 SF (Millions) Vacancy Rate (%) Vacancy 1.0 SF (Millions) 8 12 0.5 0.5 4 6 0.0

0.0 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 0 0 -0.5 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 YTD '18

Deliveries Under Construction Direct Vacancy Rate Total Vacancy Rate Asking Rate Leasing Activity Total Net Absorption Highlights

Direct vacancy in the Tysons Corner submarket decreased 10 Year Averages (2008 - 2017) from 13.1% in the third quarter 2018 to 12.6% in the fourth quarter 2018, and has decreased from 15.9% the fourth Total Absorption -10,713 SF / Year quarter 2017. Total vacancy decreased from 13.8% in the third quarter 2018 to 13.2% in the fourth quarter 2018, and Deliveries (SF) 229,019 SF / Year has decreased from 16.6% the fourth quarter 2017. Leasing Activity 2.0 M SF / Year The Tysons Corner submarket recorded 30,460 square feet of net absorption in the fourth quarter of 2018, bringing the year-to-date absorption to 956,396 square Market Stats feet. Positive absorption was driven by a 62,284-square- foot move-in by National Automobile Dealers Association Inventory 30.2 M SF at Westpark Corporate Center Building I - 8484 Westpark Drive. Direct Vacancy 12.6% The largest sales transaction of the quarter for the Ty- sons Corner submarket was the sale of N.A.D.A. Build- Total Vacancy 13.2% ing - 8400 Westpark Drive. The building was acquired by Meridian Group from National Automobile Dealers YTD 2018 Absorption 956,396 SF Association for $33,700,000 ($191 psf). The building was 62.0% occupied at the time of sale. Tysons Pond YTD Leasing Activity 2.3 M SF II - 1604 Spring Hill Road also traded this quarter. The building was purchased by Servatek from CWCapital for Under Construction 581,775 SF $10,000,000 ($147 psf). The building was sold at an auction and was 73.9% occupied at the time of sale. Percent Pre-Leased 27.8%

The largest lease signed in the Tysons Corner submarket YTD 2018 Deliveries 975,000 SF this quarter was a 168,000-square-foot pre-lease by KPMG at Boro Tower - 8350 Broad Street. Another top lease in the Tysons Corner submarket this quarter was a 2008: 2017: YTD 2018: Asking Rental Rates 26,724-square-foot relet signed by Aireon at Westpark $32.59 $33.19 $35.87 (Full Service) Corporate Center Building I - 8484 Westpark Drive. PSF PSF PSF

Tysons Corner 4th Quarter 2018

Major Leases

Westpark Corporate Boro Tower 8350 Broad Street 8484 Westpark Drive Center Building I Tenant KPMG Tenant Aireon Size 168,000 SF Size 26,724 SF Type Pre-Lease Type Relet

Boro Tower 8350 Broad Street EastBoro III 8281 Greensboro Drive Tenant Womble Bond Dickinson Tenant Alarm.com

Size 24,239 SF Size 23,493 SF

Type Pre-Lease Type Expansion

The Corporate Office North Tower 7799 Leesburg Pike 1775 Tysons Boulevard Centre @ Tysons II Tenant Potomac College Baird Wealth Tenant Size 15,497 SF Management Size 14,966 SF Type Relet Type Relet

Sales

Property Submarket Date Sold Price Buyer Seller Class Occupancy Notes

National N.A.D.A. Building $33,700,00 Meridian Automobile Tysons Corner Dec 2018 A 62.0% N/A 8400 Westpark Drive ($191 psf) Group Dealers Association

Tysons Pond II $10,000,000 Auction Tysons Corner Oct 2018 Servatek CWCapital B 73.9% 1604 Spring Hill Road ($147 PSF) Sale

Under Construction

Property Submarket Building Size Available Pre-leased Delivery Date Developer Major Tenants

The Boro Tower Tegna/Hogan Tysons Corner 438,169 SF 329,983 SF 24.7% 1Q 2019 Meridian 8350 Broad Street Lovells

Boro Loft Tysons Corner 143,606 SF 89,824 SF 37.5% 1Q 2019 Meridian Whole Foods 1640 Boro Place