(Updated at 9:05 a.m. on 7/26/2023) Fairfax County is currently the second largest suburban office market in the nation, with an inventory of 120 million square feet.
However, the current office vacancy rate sits at 16.7% — topping the county’s previous 10-year high, according to Stephen Tarditi, director of market intelligence at the Fairfax County Economic Development Authority.
He called the office market “a lagging economic indicator” when presenting the data last Tuesday (July 18) to the Board of Supervisors economic advisory committee.
Despite the county’s vacancy rate, Tarditi said the demand for office leasing is increasing.
“Last year, we had 6.6 million-square-feet of office space leased, so we’re 37% below our pre-pandemic average,” he said. “And comparing that to 2021, we were about 4.5 million square feet.”
Almost half of the county’s office inventory was built before 1990, and Tarditi said the county is seeing a bifurcation in its office market, where older buildings are not being leased at the same rate as newer buildings.
Almost 5.9 million square feet of office space is slated to be demolished or converted into another use, most of it built before 1990, according to the presentation.
“The class B, class C inventory — that’s not seeing your net new tenant demand. It’s your trophy office buildings. In fact, the trophy office vacancy rate for Fairfax County is right around 10%, which is very healthy,” Tarditi said.
According to the data, coworking space is another strong sector in the office market, with demand increasing among more small businesses.
“I think more and more building operators — if there is vacant space and newer buildings — they’re looking to incorporate coworking space and have them graduate in that space,” Tarditi said.
National economic indicators that could have a potential effect on the county’s office market include mass layoffs and interest rates. Although the county is seeing a high vacancy rate, Tarditi highlighted some statistics that could indicate growth in office demand in the future.
Fairfax County now has 42,000 employee establishments (companies with employees and payroll) — a record number for the county, according to Victor Hoskins, CEO of the Fairfax County Economic Development Authority.
“That shows that there would be future office demand as a new company is established,” Tarditi said.
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