Available offices on the rise in Courthouse due to aging buildings

(Updated at 5:15 p.m.) One pocket of Arlington County has the most office space on the market and seeking tenants in the D.C. area, according to a new report.

A submarket made up of Courthouse, Clarendon and Virginia Square tops the charts for its “availability rate” — which includes any offices that can be leased now or in the next year — because of its high concentration of older office buildings.

“There are a number of dated 1980s-constructed buildings that sit idle as tenants continue to re-evaluate their office needs and often move to newer or renovated buildings in different submarkets,” says Ben Plaisted, vice chairman at commercial real estate company Savills, which produced the report.

In this submarket, Arlington Economic Development staff says 80% of offices were built more than 20 years ago.

“National and regional trends show that new leases tend to prefer buildings built in the past 10 years,” the county’s economic development arm said in a statement. “As a result, submarkets with newer product tend to have lower availability and submarkets with older product tend to have higher availability.”

Across Arlington, vacancy is concentrated in older buildings: about 75% of vacant square footage is within buildings at least 30 years old, says AED.

In response, why Arlington County is trying to infuse old office buildings with a mix of emerging businesses, such as research and development, artisan workshops, breweries and distilleries, and even pickleball courts.

AED provided a few caveats to the report.

It says Savills combined Courthouse, Clarendon and Virginia Square into one submarket, while another real estate company, CoStar, only combines Courthouse and Clarendon. That changes the overall availability rate.

Without Virginia Square, Clarendon-Courthouse has the second-highest availability rate in Northern Virginia and the D.C. area, behind Herndon, according to July 2023 data from CoStar, AED said.

Including Virginia Square means adding one major construction project to the mix: George Mason University’s FUSE building, says AED. The new facility has over 100,000 square feet listed as available for tenants.

The economic development division also says availability rates should be taken with a grain of salt.

“Availability rates can mask available square feet, as submarkets vary greatly in size,” AED said. “Therefore, the same amount of available square footage would appear as much lower availability rates in larger submarkets.”

Like other parts of the nation, Arlington is seeing tenants seek out smaller offices in higher-quality buildings, dubbed the “flight to quality.”

Overall, the report notes Arlington has some of the highest rent prices in the D.C. area, which is due to building quality plus proximity to D.C. and Metro. Over 60% of Arlington’s office product is listed by CoStar as Class A, or those built recently with attractive amenities and high rents, among other features.

“[Tenants] are willing to pay top dollar for high quality space but by reducing their footprint, they are not increasing their overall real estate costs,” Plaisted said. “The war for talent continues to be prevalent in the market and occupiers are looking to incentivize staff to be at the office by upgrading their physical location and space.”

Not everyone is reducing their footprint, however. AED says a half-dozen Arlington-based firms, from consulting firms to to government contractors, expanded their offices over the last year.

Meanwhile, a handful of British tech firms recently opened outposts in Arlington, while shipbuilding company Huntington Ingalls moved some of its offices from D.C. to National Landing.

Arlington has scored some commercial real estate wins with retention of tenants. The only notable tenant that AED says — to their knowledge — fully moved out of Arlington over the past year is the tech company Ostendio, which is now fully virtual.

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