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Northern Virginia Prime Product Rosslyn • Tysons • Reston

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Northern Virginia Prime Product Rosslyn • Tysons • Reston NORTHERN VIRGINIA PRIME PRODUCT ROSSLYN • TYSONS • RESTON WINTER • 2015 For more information contact: Revathi Greenwood Director, Research and Analysis +1 202 585 5662 [email protected] Connor Wilson Research Coordinator +1 703 288 2577 [email protected] John Groce Research Coordinator +1 202 585 5615 [email protected] CBRE 750 9th Street, NW 1861 International Drive Suite 900 Suite 300 Washington, DC 20001 McLean, VA 22102 © Copyright 2015 CBRE Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of the CBRE Global Chief Economist. 2 | CBRE RESEARCH OVERVIEW The “flight to quality” narrative is well established in Northern Virginia with prime, well-located assets outperforming the rest of the market on key leasing metrics. However, the definition of quality varies by submarket. This report by CBRE Research explores the key markers that define quality from a leasing perspective in the submarkets of Rosslyn, Tysons, and Reston. Rosslyn’s views of Washington, D.C., Tyson’s new metro accessibility, and Reston’s 24/7 environment in the town center, drive leasing in a prime subset of buildings. ROSSLYN TYSONS RESTON Office Inventory 9.5 26.2 18.3 (MSF) Metro Lines 3 1 1 - McLean - Wiehle-Reston East - Tysons Corner Metro Stations - Rosslyn - Reston Town Center - Greensboro (planned for 2020) - Spring Hill Residents with a college degree 83% 72% 68% or higher Walk score 88 49 36 (/100) Population between 42% 16% 13% 25 and 34 - Metrorail and mall walkability - Prime views of Washington, D.C. - Newer construction with - Integrated walkable mixed use Prime product differentiators - Rooftop access emphasis on state of the art environment amenities Prime product rent premium +19% +44% +80% vs. Submarket class A Source: CBRE Research, Q4 2015 3 | CBRE RESEARCH ROSSLYN Prime Building Locations Prime Buildings Percent Leased Average Asking Rent (FS) 9 72% $61/SF Rosslyn, defined by its proximity to D.C. and metro accessibility, was historically dominated by large government agencies and contractors seeking cost-effective alternatives to the District. Rosslyn’s overall asking rate is currently 16% lower than D.C.’s $53.38 per sq. ft. Following the government pullback during sequestration and the uptick in vacancy they created, other industries such as business and financial services and technology have begun backfilling the space. Rosslyn is currently morphing into an amenity-rich environment to cater to its large population of highly educated young professionals. This transformation is driven by the 3.4 million sq. ft. of office space currently under review/construction or site plan approved, with JBG’s “Central Place” spearheading the creation of a large outdoor public plaza. The prime buildings in this market command a 19% rent premium for their D.C. views compared to average Class A asking rates. Rosslyn’s sloping topography allows certain older buildings to capture these desired views, enhancing their ability to charge rent premiums and prompting landlords to add roof top terraces to buildings. Sustainability is also a marker of prime product with seven buildings receiving LEED awards, of which four are gold, and one, 1812 N Moore, receiving a platinum rating. Parking ratios in the prime set equate to 1.3 parking spaces per 1,000 sq. ft. All listed buildings are within 0.2 miles of Metro and even with 1201 Wilson under construction and 1812 N Moore completely vacant, these prime buildings sit 1% lower than the overall Class A vacancy rate. 4 | CBRE RESEARCH Layout ID:P05 MapId:3220120 © 2015 CBRE Limited. Data © TeleAtlas, Google, AerialExpress, DigitalGlobe, Landiscor, USGS, i-cubed. The information contained herein (the “Information”) is intended for informational purposes only and should not be relied upon by recipients hereof. Although the Information is believed to be correct, its accuracy, correctness or completeness cannot be guaranteed and has not been verified by either CBRE Limited or any of its affiliates (CBRE Limited and its affiliates are collectively referred to herein as “CBRE”). CBRE neither guarantees, warrants nor assumes any responsibility or liability of any kind with respect to the accuracy, correctness, completeness, or suitability of, or decisions based upon or in connection with, the Information. The recipient of the Information should take such steps as the recipient may deem appropriate with respect to using the Information. The Information may change and any property described herein may be withdrawn from the market at any time without notice or obligation of any kind on the part of CBRE. The Information is protected by copyright and shall be fully enforced. Leased Rosslyn Expiring Within 3 Years Available Direct Space Available Sublet Space 1812 1001 1801 1919 1300 1000 1100 1101 1201 N Moore St N 19th St N Lynn St N Lynn St N 17th St Wilson Blvd Wilson Blvd Wilson Blvd Wilson Blvd Owner Monday Properties Brookfield Morgan Stanley Paramount Tishman Speyer Monday Properties Monday Properties Monday Properties JBG Owner Monday Paramount Monday Monday Monday JBG RBA (SF) 535,500 243,000 350,000 650,000 392,000 560,000 525,000 368,000 531,000 RBA (SF) 535,500 243,000 350,000 650,000 390,000 560,000 525,000 368,000 531,000 YearYear Built/R Built/R 20132013 1989/20151989/2013 2002 20082008 1980/20121980/2012 1981 1985/2002 19891989 20182018 FloorsFloors 35 35 20 24 2424 1919 31 3131 2424 3131 FloorFloor Plate Plate (SF) (SF) 23,00023,000 18,500 21,000 26,00026,000 21,00021,000 20,000 19,000 18,00018,000 23,00023,000 PercentPercent Leased Leased 0%0% 60%57% 100% 100%100% 81%81% 79%% 82%82% 83%81% 65%65% Rent RangeRent FSRange ($/SF) FS($) 55-6059 - 65 5555-60 - 62 5450-55 - 59 5855-60 - 62 5050-55 - 55 5055-60 - 65 4655-60 - 58 52-5752 - 57 60-6562 - 70 MetroMetro Dist (miles) Dist (miles) 0.10.1 0.2 0.1 0.20.2 0.20.2 0.2 0.10.1 0.10.1 0.10.1 D.C.DC ViewView YesYes YesYes YesYes YesYes YesYes YesYes YesYes YesYes YesYes - Strategic - FBR & Co. Investment Group - GSA – State - CEB - Sands Capital Key Tenants - None - BBN - WJLA - BAE - CEB - MCG Capital Department - Deloitte - Politico Technologies Corporation Source: CBRE Research, Costar, Q4 2015 Rosslyn Vacancy ($/SF) Rosslyn Asking Rents Prime Prime 35% $61 Class A $60 Class A 29% $51 30% 28% Prime Without 1812 $46 All Classes N Moore $50 25% $40 20% 18% $30 15% $20 10% $10 5% $0 0% 5 | CBRE RESEARCH Source: CBRE Research, Q4 2015 Source: CBRE Research, Q4 2015 TYSONS Prime Building Locations Prime Buildings Percent Leased Average Asking Rent (FS) 5 72% $50/SF Tysons, Northern Virginia’s largest submarket, and home to the headquarters of five of the 15 fortune 500 companies in the Washington D.C. region, has undergone major redevelopment with the addition of the Silver Line Metro. Following zoning changes, Tysons has more than 19 million sq. ft. of office space currently under review/construction or site plan approved. Prime product in Tysons commands a 44% rent premium and is defined as newer construction, with proximity to Tysons Corner Center and Tysons Galleria, offering walkability to one of the four Metro stations. Tysons prime space currently sits about 28% vacant compared to the Class A vacancy rate of 16%. This is attributed to the new construction at 1775 Tysons Boulevard and the recent introduction of a large block of Gannett’s former space at 7950 Jones Branch. 1775 Tysons Boulevard signed a lease with its lead tenant, Ernst & Young, and is currently 26% preleased. Vacancy for high quality well-located assets is expected to drop significantly over the next 12 months due to strong demand for such space. The prime set features a parking ratio of 3.0 parking spaces per 1,000 sq. ft. with three of the five buildings achieving LEED awards. 1775 Tysons Boulevard is designed to be the first Tysons building to reach the platinum level. 6 | CBRE RESEARCH Tysons Leased Expiring Within 3 Years Available Direct Space Available Sublet Space 1800 1775 7900 1850 7950 Jones Branch Dr Tysons Blvd Tysons Blvd Tysons One Pl Towers Crescent Plz South Tower North Tower OwnerOwner LernerLerner LernerLerner MacerichMacerich QuadrangleQuadrangle Tamares RBARBA (SF) (SF) 320,000320,000 478,000476,000 528,000528,000 295,000295,000 707,000 Year BuiltYear/R Built/R 20062006 20162016 20142014 20092009 2001 FloorsFloors 13 1818 2222 13 13 12 9 Floor PlateFloor (SF) Plate (SF) 25,00025,000 30,00030,000 228,500 ,500 22,00022,000 30,000 35,000 91% PercentPercent Leased Leased 99%99% 26%26% 85%85% 89% 75% Rent Range FS($) 41-46 48-52 50-55 44-46 50-53 Rent RangeMetro FS ($/SF) Dist (miles)41-0.2 46 480.2 - 52 500.1 - 55 0.544 - 46 50 - 53 Metro Dist (miles) 0.2 0.2 0.1 0.5 0.9 - Intelsat Key Tenants - PwC - EY - MicroStrategy - Gannett - Deloitte Source: CBRE Research, Costar, Q4 2015 Tysons Vacancy Prime Tysons Asking Rents Prime Class A Class A ($/SF) Prime without All Classes 35% 1775 Tysons $60 30% 28% $50 25% $50 20% $40 16% 16% $35 $33 15% $30 10% $20 5% $10 0% $0 7 | CBRE RESEARCH Source: CBRE Research, Q4 2015 Source: CBRE Research, Q4 2015 RESTON Prime Building Locations Prime Buildings Percent Leased Average Asking Rent (FS) 8 98% $54/SF The Reston Town Center is the most highly sought after office environment within the Reston submarket due to its unique urban environment in an otherwise traditional suburban landscape.
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