Though federal workforce reductions will likely cause fluctuations in office space this year, Northern Virginia’s most sought-after properties are expected to remain valuable.
A new data analysis from Savills US notes some “encouraging signs of recovery” in the first quarter of this year, but anticipates a bumpy ride for the region’s commercial properties as shakeups at the federal level play out.
“New Department of Government Efficiency (DOGE) initiatives have introduced significant uncertainty into the market outlook,” a spokesperson said in a media release. “The federal government has announced plans to reduce headcount, shrink leased office footprints, and dispose of federally owned buildings — moves that could substantially impact Northern Virginia’s commercial real estate landscape, where government tenants have historically provided stability.”
Still, analysts believe, “trophy properties should remain insulated from these changes.”
That may be good news for Arlington, which is home to some of the most expensive offices in the region.
In terms of rental rates, Rosslyn ranked as the priciest submarket in Northern Virginia at $43.27 per square foot. The Clarendon/Courthouse/Virginia Square submarket was next highest at $40.63, followed by $40.17 for Ballston and $38.61 for National Landing.
In Northern Virginia as a whole, the average rental rate was $35.39.
“Tenants continue to value properties with premium amenities and prime locations,” the Savills analysts said.
The new report estimates that 24.7% of all office space in Northern Virginia was available for lease and sublease during the first quarter, down slightly from last year.
Many of Arlington’s commercial corridors had above-average vacancy rates. The Clarendon/Courthouse/Virginia Square area was at the top of the charts for commercial availability, at 34.8%.
Ballston’s rate stood at 30.3%, National Landing was at 25.9% and Rosslyn was at 20.8%.
The region as a whole has seen some good news since the end of 2024, with leasing activity increasing 10.3% to reach 2.1 million square feet. Unoccupied space fell across all classes of commercial offices, including a large decline in top-tier Class A space.
Despite concerns about federal agencies not renewing leases, the last few months have had some bright spots, according to the report.
The federal government renewed a lease for 171,000 square feet of space serving the Federal Deposit Insurance Corporation at 3701 N. Fairfax Drive in Virginia Square. The U.S. Postal Service also secured 94,319 square feet of office space at 1735 N. Lynn Street in Rosslyn.
That was good news for Arlington officials, who even before Covid and federal downsizing were facing challenges in filling available office space.
At the April 8 meeting of the county’s Economic Development Commission, Vice Chair Nick Gregorios said the community needs to keep its economic development focus on five pillars: business investment, thriving commercial areas, tech jobs, a strong small-business ecosystem and a commitment to arts/culture tourism.
At the same meeting, Ryan Touhill, who heads Arlington Economic Development (AED), said that his department emerged from the county government’s Fiscal Year 2026 budget process with the resources it needs.
“AED will be well-positioned in the next year,” he said.
Across Northern Virginia, availability of space for sublease has declined over the past year, analysts for Savills say. But those numbers may begin to climb again if government contractors need to lay off workers owing to federal-spending cuts.
But there may be some good news for existing landlords: The Savills analysts believe that some tenants may opt to stay put rather than move to new space, owing to what could be higher relocation build-out costs due to new tariffs.
