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News release

Washington, DC.

Rise in Leasing Activity, Lack of New Construction Characterize DC Region Commercial Real Estate Market

Opportunities for tenants in D.C., Maryland and Virginia closing

Washington, D.C., March 10, 2011 – Increased leasing activity coupled with a halt in new construction has led to a tightening of real estate markets in Washington, D.C., Suburban Maryland and Northern Virginia.  As large blocks of vacant space continue to dwindle, rental rates throughout the region are rising, gradually shifting leverage to the landlords.

Washington, D.C.

Tenants looking for large blocks of contiguous space in the D.C. market face limited options as a result of slowed construction activity and the aggressive expansion of the federal government.  In fact, the total number of large blocks of vacant space, 75,000 square feet or more, fell from 42 in the middle of 2009 to the current total of 17.

After bottoming in the first quarter of 2010, rents have increased for the last three quarters, with average full service asking rents up 6.7 percent since the market’s bottom.  Outlying markets have seen increases in rents as well, due primarily to federal leasing activity. 

While the federal government has been the primary demand driver, the private sector is also showing signs of growth, particularly within the Trophy and Class A market segments.  With only four buildings remaining in the pipeline - three of which are substantially pre-leased – rents are expected to continue to rise in 2011, spiking by the end of the year and into 2012.
Suburban Maryland

Fueled by demand from the federal government, the Suburban Maryland market is experiencing an uptick in leasing, dropping vacancy rates and rising rents.  In Bethesda, the last remaining block of space greater than 75,000 square feet was taken by the federal government’s roughly 200,000 square foot lease for the new U.S. Healthcare Initiative in June 2010. The federal government continued its trend, recently completing a deal for 144,000 square feet in a newly delivered building in Rockville. 

Due to this government demand, large users in Montgomery County are being forced to look at options further north along the Rockville Pike and I-270, where large blocks of space are still available. 

At the end of the fourth quarter of 2010, vacancy rates in Suburban Maryland were at their lowest point in over a year.  In this supply-constrained market, rents have risen from an average Class A asking rent of $28.31 in July 2009 to the current rate of $29.61.
Northern Virginia

The window of opportunity is closing for tenants in Northern Virginia as the market tightens due to heavy leasing activity and a lack of new construction.  

Only 171,330 square feet delivered to the market in 2010, 40 percent of which was pre-leased.  The lack of new construction, coupled with the 2.7 million square feet of space taken by the federal government last year, contributed to rapidly falling vacancy rates throughout Northern Virginia.

Since mid-year 2009, 3.2 million square feet of space has been taken, with the total number of blocks of available vacant space greater than 75,000 square feet dropping from 58 to 42. 

Areas inside the Beltway, including Arlington and Alexandria, are experiencing quick recoveries, as rental rates increased between five to ten percent in 2010, depending on building class and location.

About Jones Lang LaSalle 

Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 60 countries from more than 1,000 locations worldwide, including 185 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $41 billion of assets under management. For further information, please visit our website,