Despite steady growth in employment numbers, office vacancy rates in Fairfax County continue to rise.
Stephen Tarditi, director of market intelligence at the Fairfax County Economic Development Authority (FCEDA), presented recent data on office vacancies to the Board of Supervisors during an economic advisory committee meeting yesterday (Tuesday).
“We expect it to continue to rise in the near term, but what I like to point out is the rate at which it is rising is actually slowing,” Tarditi said, “which may be indicating that we’re getting close to a peak on that and might be approaching the recovery status.”
Last July, Tarditi told the committee that the current vacancy rate was at 16.7% — topping the county’s previous 10-year high. By the end of 2023, the rate was at 17.2%, a number Tarditi called unhealthy. Some of the vacancies were attributed to real estate decisions that were made before the pandemic.
There’s a particular concentration of high-vacancy office buildings — ones that have over 50,000 square feet of space but are less than 33% leased — in the western part of the county, along the Dulles Toll Road and Route 28 corridors, according to the FCEDA’s presentation.
Citing data from CoStar, which tracks commercial real estate inventory, the economic development authority says the county has 28 high-vacancy office buildings with a total of 3.7 million square feet of space.
Even with the increase, Tarditi said the county isn’t seeing the same elevated vacancy levels as competitive markets on the West Coast.
“Seattle and San Francisco both saw year-over-year rises of 6% or [more],” he said. “Austin, which is considered the Sunbelt market, also saw a 5% increase year over year, where [in] the Northern Virginia region, it was more about 1.4%, and we again attribute that to our economic stability.”
Tarditi said expected cuts in interest rates by the Federal Reserve will bring some relief to the commercial real estate market and possibly increase office leasing numbers. Additionally, the FCEDA plans to continue pursuing companies in high-growth industries like artificial intelligence to combat rising vacancies.
The county will continue looking at repurposing vacant office buildings for alternative uses like multi-family buildings and consider a study.
According to the FCEDA, developers have proposed demolishing 70 office buildings totaling 7.1 million square feet. There are also eight buildings totaling 1.6 million square feet that are being eyed for conversion into housing or another use.
“There are studies across the U.S…where they’re taking a look at a priority list of office buildings that are best suited for repurposing,” Tarditi said.
Clara Johnson, a planner for the Fairfax County Department of Planning and Development, said the department is conducting research on land use trends related to office space that will help inform an amendment to the comprehensive plan policy plan, which definies the county’s goals, including for economic development and land use, and is in the midst of a full-scale update.
The research is expected to be published in the fall and shared with the Board of Supervisors.
“It could include expanded criteria for repurposing projects to meet other goals, like affordable housing, workforce housing,” Johnson said. “It could include the addition of new uses, perhaps hotels, projects that can be repurposed into housing, and also new criteria for retaining and planning for office.”
