Washington, DC Metropolitan Area market indicators describe a commercial market that is performing better than most markets in the country, but it is clear that both sales and leasing activities have suffered over the last year. The commercial real estate market's downturn continued in the second quarter of 2008, hurt by the credit crunch, a weak economy, and slowing tenant demand, resulting in a rise in vacancy rates and a slowdown in rental rate growth.

Demand for office space in the Washington, DC Metropolitan Area continued to weaken in the second quarter, with new leasing activity tapering off dramatically. The office sector faced slowing absorption and increasing vacancies during the second quarter of 2008, as vacancy rates increased to 10.8% from a first quarter rate of 10.1%.

Right now, landlords are granting generous concessions in response to the slowing rate at which new leases are being signed. Average asking rents in the region have started to level out, ending the second quarter at an average rent of $33.58 per square foot, down slightly from a 2007 rate of $33.62 per square foot. Concessions are progressively becoming more common in final lease negotiations, which are also lowering the effective rates of the lease. Some landlords are now offering rent abatements of six months or are proposing very generous tenant improvement allowances and expansion rights to lure prospective tenants. For example, in submarkets, like Route 28 South in Northern Virginia, where vacancy rates have increased dramatically due to a glut of new office buildings, landlords have been known to award as much as $75 per square foot for tenant build-outs in order to attract a large tenant. And others are permitting tenants to push out their occupancy dates in order to lock-in their lease. But, there haven't been too many landlords negotiating actual rates, largely because the financing and building valuation would not allow that.

No doubt, companies are still wary of committing to a new lease during an economic slowdown. However, the District still saw a handful of high profile deals during the second quarter. For example, law firm Arent Fox made the decision to move its office one building over, from 1050 Connecticut Avenue, NW to 1000 Connecticut Avenue, NW, when its lease expires in 2012. The former building at 1000 Connecticut Avenue is nearly demolished. A 394,145 square foot, 12-story office building will rise in its place, with Arent Fox taking floors two through nine.

But, unlike Arent Fox, the majority of companies are choosing to stay put rather than risk leasing new space. The rising cost of tenant build-outs and the slowdown in economic growth has created a fear and a dose of uncertainty. Surely, the decline in leasing coupled with the developments under construction and in the pipeline could create a surplus of new supply.

OUTLOOK
Despite significant recent shocks to the regional economies, the Metropolitan Area should continue its strong performance and growth in 2008. But, it must be noted that the region is not recession proof and there are many who are holding off on making big decisions until there are signs of a much stronger economy on the horizon. Right now, building operating costs are increasing, construction costs are rising, and the psychology of the credit crunch seems to be affecting real estate decision makers as plans for upgraded office space are being moved to the back burner.

The District's vacancy rate was 6.9% at the end of the second quarter, up from 6.6% at the end of the first quarter and 6.4% twelve months ago.

Average asking rents have increased to $45.26 per square foot, from a second quarter 2007 average rate of $43.50 per square foot. Contributing to the increase in vacancy during the second quarter, was the delivery of 673,958 square feet, of which only 21.7% was occupied at the time of delivery. However, the United States Immigration and Customs Enforcement's move to 493,196 square feet at 500 12th Street, NW aided in keeping vacancy rates from rising above the 7.0% mark.

With a slowdown in new leasing activity, it is apparent that office tenants in Washington, DC are staying put, choosing to renew their current leases or even sublet some of that space to save money. It was just a few years ago when tenants were opting to lease additional space, in anticipation of new hires and expansion. Those days are over, as tenants are more cautious and are often leasing for immediate needs only. The only exceptions involve tenants who have strong financials and require space in high-end buildings, often referred to as "trophy space". These firms, many of which are law firms, will repeatedly pay the high price tag needed to secure a popular location that offers top of the line amenities. And, with "trophy space" now scarce in the District, trophy buildings continue to see dramatic increases in price per square foot rents. For instance, it is rumored that a trophy building under development at 300 New Jersey Avenue will ask $100 per square foot.

The majority of second quarter lease transactions have been renewals or renewal/expansions. For instance, the National Labor Relations Board renewed for 276,032 square feet at 1099 14th Street, NW in the Central Business District. In the East End, the U.S. Department of Justice (DOJ) signed a renewal/expansion totaling 61,270 square feet at 800 K Street, NW. The government agency renewed 44,251 square feet and signed a new, five year expansion lease for 17,019 square feet on the eighth floor. Also in the East End, PricewaterhouseCoopers LLP renewed approximately 130,000 square feet at 1301 K Street, NW. The massive accounting and auditing firm is located in the west tower of One Franklin Square. And lastly, SmithBucklin, an association management company, signed a 10-year lease to renew and expand its Central Business District office at 2025 M Street, NW. The firm, now occupying 54,963 square feet, will lease an additional 16,426 square feet. Currently, SmithBucklin is occupying floors seven and eight and part of six. The options they have to expand will allow them to take over most of the fifth floor.

Despite the slowdown and gravitation toward renewals during the second quarter, there were still a handful of notable transactions, particularly in the Central Business District. For example, Arent Fox will be the anchor tenant of the new trophy building that will arise at 1000 Connecticut Avenue, taking 261,433 square feet of the 394,145 square foot building, for an initial 17-year lease to commence in 2012. The firm is moving because its 30-year lease at Washington Square will expire in 2012. Arent Fox will relocate from 216,569 square feet at 1050 Connecticut Avenue, where it houses more than 250 attorneys. The 1000 Connecticut Avenue building will sit on the corner of Connecticut and K Street, NW, between 17th and 18th streets. It is scheduled to break ground this summer and is estimated to be completed by May 2010.

Other notable second quarter leases included New America Foundation's, a nonprofit policy institute, lease at 1899 L Street, NW. The firm signed an 11- year lease at the 140,000 square foot building. The 12-story building is currently anchored by Blackboard Inc's headquarters, which is moving to a new building at 650 Massachusetts Avenue later this year. New America Foundation will move from 1630 Connecticut Avenue, NW to occupy 23,836 square feet on two floors of the building. New America Foundation is currently located on two, non-contiguous floors. They wanted to be in a building where they could occupy two contiguous floors with a stairwell connecting them.

Lastly, with the "Green Initiative" rapidly underway in the District as well as the Washington, DC Metropolitan Area, the U.S. Green Building Council (USGBC) leased 75,446 square feet at 2101 L Street, NW. This move is an expansion of the green building association, as it has outgrown its current headquarters at 1800 Massachusetts Avenue. USGBC needed the additional space to accommodate the new staff hires it is planning to make. There were no expansion options at 1800 Massachusetts Avenue. USGBC expects to achieve a LEED Platinum rating for the build out of the interior space of its new space and will occupy its new space in March 2009. Until then, it will occupy for a short period of time, 15,000 square feet at 1919 M Street, NW.

The rapidly evolving "Green Building" approach to design and construction continues to provide a very positive environmental change for the District, as evidenced by the USGBC's plans. While LEED certified buildings aren't abundant in the DC area yet, there are a handful of Gold LEED certified buildings, and even fewer that have available space. But, at the same time, there is growing demand from tenants in all industries to occupy green buildings. No doubt, "Green" has become a deciding factor in leasing decisions. For example, the law firm of Baker & Daniels announced, during the second quarter, that the firm will be moving to an 11-story, Gold LEED-designed building under construction at 1050 K Street, NW. It is taking 37,147 square feet in the building, which will deliver in September 2008. The law firm is moving from 25,000 square feet at 805 15th Street as part of an expansion. The firm had many options from which to select, but favored the Gold LEED certification the building expects to receive, as well as the detail the owners are incorporating into the design. That, plus the timing of the delivery made this location the right choice for the firm.

In other second quarter "Green News", the 190,000 square foot office building, located at 20 M Street, SE in the Capitol Hill sub-market, was the first in the city to be awarded a LEED Gold certification for Core & Shell Development. While 20 M Street was vacant at the close of the second quarter, it is expected that the Gold LEED certificate will aid in speeding up the lease-up of the building. Capitol Hill is still considered an emerging market, which makes this location unusual for a Gold LEED building. The 10-story building is part of the general revitalization underway in southeast around the Navy Yard and Baseball Park.

Further capitalizing on the "Green Movement," plans were unveiled, during the second quarter, for the development of PNC Place, a 365,000 square foot office building just blocks from the White House, which is expected to be Washington, DC's greenest office. The PNC Financial Services Group Inc. and Vornado/Charles E. Smith have formed a joint venture, PNC/Vornado LLC, to build the property, which will adhere to LEED Platinum standards. PNC Place will sit at 800 17th Street, NW in the city's Central Business District and will become home to PNC's regional headquarters. The company will occupy a portion of the 12-story structure, leaving approximately 300,000 square feet of class "A" office space available for lease.

Development activity remains strong in the District, with 7.0 million square feet under construction and an additional 1.4 million square feet under renovation. Although the majority of future development in the District will now occur in emerging markets such as Mount Vernon Triangle, NoMa and the Capitol Riverfront, the Central Business District and the East End will continue to evolve. With 3.6 million square feet currently under construction in the North of Massachusetts/Capitol Hill/Southeast sub-markets, it's apparent that developers are focusing their sights on this emerging submarket as the next hot spot. Recent ground breakings include Opus East's new development at 1015 Half Street, SE in Capitol Hill. The $200 million, 400,000 square foot project has been designed to receive, at a minimum, Silver LEED certification. Fronting on L, Half and K streets, the building will have three levels of underground parking and has the potential for first-floor retail space. The building is expected to deliver in 2010, although no preleases have been signed yet. The asking rates will be in the mid- $30's per square foot, triple net.

On May 9, 2008, The American College of Surgeons (ACS) broke ground on a 165,000 square foot office building at 20 F Street, NW in Capitol Hill. The building, which will only be partially occupied by ACS and affiliated organizations, has about 115,000 square feet available to lease. Plans call for ACS to occupy all of the 10th floor and its affiliates to occupy a portion of the third floor. The firm has letters of intent on some 15,000 square feet, leaving about 115,000 square feet of rentable space. Asking rates start in the high $30s per square foot and go to the mid-to-upper $40s per square foot, triple net. Building delivery is scheduled for 2010, with some tenants able to do interior build out towards the end of 2009.

And, lastly, developer Boston Properties recently broke ground on Square 54, a mixed-use, 2.5 acre, town center at 2200 Pennsylvania Avenue, NW, adjacent to the Foggy Bottom-GWU Metro station. The development will include retailers, a grocery store, apartments and office space.

Class "A" office buildings in the District have become a commodity in the past year, with 8.4 million square feet of class "A" office space under construction or renovation in the city and more on the way. The glut has flattened rent growth and encouraged concessions in the class "A" market, while demand for the top-quality trophy buildings and lower quality class "B" and "C" buildings has pushed rents in those buildings up slightly.

It is expected that the District will enjoy continued health, as long as developers show restraint when developing speculative buildings. With the proximity of federal government jobs and top universities that attract employers, the Washington region is more prepared to survive the economic slump in commercial real estate than most of the United States. Weak job growth is not likely to slow the DC commercial market. The federal government will remain a steady source of jobs and will attract employees in life sciences, defense, and telecommunications.

In Suburban Maryland, the overall vacancy rate rose to 13.6% from a first quarter rate of 12.8%. Unlike the District, rental rates have remained relatively flat over the last twelve months, ending the second quarter of 2008 at $26.74 per square foot, up only slightly from $26.65 per square foot.

In Montgomery County, vacancy rates increased only slightly over the last three months, ending the second quarter at 10.9% from a first quarter rate of 10.4%. While a number of submarkets within the county witnessed stabilized vacancy rates, Rockville and Silver Spring saw vacancy rates increase during the second quarter.

Vacancy rates in Rockville increased to 10.7% from a first quarter rate of 9.3%. Contributing to the increase in vacancy was Notable Solutions' vacancy of 28,394 square feet at 600 Jefferson Plaza and the delivery of The Preserve at Tower Oaks, a 183,788 square foot office building located at 1 Preserve Parkway. The new building was only 16.8% leased at the close of the second quarter.

Silver Spring also contributed to the slight increase in vacancy in Montgomery County, as the submarket saw rates increase to 9.7% from a first quarter rate of 7.8%. Contributing to the increase in vacancy was Ferris Baker Watts' decision to sublease 23,793 square feet at 8403 Colesville Road as well as APS Healthcare's vacancy of 62,053 square feet in the same building.

With vacancy rates increasing slightly in Montgomery County, leasing activity has been minimal. However, there were a handful of notable transactions that will contribute to reduced vacancy rates, in pockets of Montgomery County, when these tenants occupy their new offices. For instance, NextPoint Networks signed a 53,300 square foot lease in the North Rockville submarket. Furthermore, defense contractor EG&G, a division of URS Corp., leased 51,000 square feet of office space at Seneca Meadows Corporate Park in Germantown during the second quarter. The firm will occupy space currently tenanted by GE Aviation at 20501 Seneca Meadows Parkway in July. And, lastly, the Nuclear Regulatory Commission signed a renewal/expansion for 87,765 square feet at 12300 Twinbrook Parkway in Rockville.

Prince George's County also saw vacancy rates continue to increase, during the second quarter, surpassing the 20.0% mark. June 2008 ended with a vacancy of 21.5%, up from a first quarter rate of 19.9%. Contributing to the increase in vacancy was Access Worldwide Communication's decision to put 24,525 square feet up for sublease at 6505 Belcrest in College Park and Verizon's decision to continue to downsize, leaving behind 27,573 square feet at 11720 Beltsville Drive in Beltsville.

The delivery of two buildings, totaling 150,000 square feet, at the National Harbor in the Oxon Hill submarket, also contributed to the increase in vacancy, as only 20.0% of the 150,000 square feet was occupied at the close of the second quarter. On a positive note, the $4 billion National Harbor is primed not only to transform Prince George's image but also to become an economic force, anticipated to generate more than 5,000 jobs and $130 million in tax revenue each year for the county and state.

Now that National Harbor is fully underway, Prince George's County can take credit for one of the biggest development projects ever to hit the Washington, DC Metropolitan Area: 300 acres of residential, retail, dining, office, and entertainment space on the banks of the Potomac River. When the project is finished in 10 years, National Harbor will be twice the size of downtown Silver Spring and have a bigger footprint than Minnesota's Mall of America, the country's largest shopping center.

Despite the increasing vacancy rates, Prince George's County was home to the largest lease of the quarter in Suburban Maryland. Corporate Office Properties Trust executed a long term lease to Intelligence Advanced Projects Activity for the entire four-story, class "A" office building, consisting of 123,000 square feet at M Square Research Park. The newly formed U.S. government research agency is a consolidation of National Security Agency's Disruptive Technology Office (previously called the Advanced Research and Development Activity); the National Geospatial- Intelligence Agency's National Technology Alliance; and the Central Intelligence Agency's Intelligence Technology Innovation Center. The building, located at 5850 University Research Court in College Park, has an anticipated completion date of December 2009.

It's unclear how much the economic downturn and slowed housing market will affect Prince George's County as well as the new, exciting development at National Harbor, but it is expected that the continued development of the National Harbor will inevitably transform the identity and look of Prince George's County. The area will slowly reposition itself as popular place where people will want to live, work, and play. Positive changes in Prince George's County and Suburban Maryland, as a whole, are definitely on the horizon!

While the District, Suburban Maryland, and Northern Virginia saw vacancy rates rise during the second quarter, vacancy rates increased the most dramatically in Northern Virginia, which was due in large part to developer's decisions to forge ahead with new office projects that continue to increase the level of supply. Accordingly, vacancies rose to 12.4% from a first quarter rate of 11.4%.

In Northern Virginia, leasing activity slowed noticeably thanks to a continuing sluggish economy and growing concerns about the long-term effects of oversupply of new inventory. Increases in vacancy were seen in Fairfax and Loudoun counties, but remained constant over the last six months in Arlington, Alexandria, and Prince William County. In Arlington County, vacancy rates remained healthy, ending the second quarter at 8.5%, down nominally from a first quarter rate of 8.6%. Renewal activity aided significantly in keeping vacancy rates stable during the second quarter, as evidenced by large renewals signed by the National Guard Bureau and the United States Post Office. No doubt, the increase in renewal activity is a sign that many companies are wary about the current state of the economy, and thus, are happy to stay where they are.

Other second quarter renewals included The General Services Administration's (GSA) renewal of 235,983 square feet at a class "B" office building in Pentagon City at 400 Army Navy Drive. GSA secured the five-year term lease on behalf of the Department of Defense. The lease has an additional one-year renewal option. The Defense Department has been the sole occupant of the building since 1986, when it was renovated.

The second quarter also saw a handful of mediumsized transactions, including Argosy University's expansion of 33,084 square feet at 1550 Wilson Boulevard in Rosslyn. This expansion will bring Argosy's total space on the fifth and seventh floors up to 47,000 square feet.

Unlike western Fairfax County, development activity remains minimal in Arlington County, which has maintained Arlington's healthy relationship between supply and demand. The second quarter was home to one building delivery. Called Randolph Square, 2800 South Randolph Street is a 208,000 square foot, nine-story office complex, which is 79.0% occupied by the U.S. Patent and Trademark Office. The building is located in Shirlington, off the main thoroughfare of I-395.

The only building in Arlington County under construction is National Gateway I, located in the Crystal City submarket. The nine-story structure will comprise of 180,000 square feet of office space, with a projected delivery date of November of 2009. Plans call for five additional National Gateway buildings, totaling 1.1 million square feet of office space. When completed, National Gateway will total more than 2 million square feet of office space, 210,000 square feet of retail space and more than 2,000 residential units and hotel rooms.

Among development projects in the planning stages, Virginia Tech announced its plans, during the second quarter, for a major research facility in Ballston. University and Arlington County officials have been talking publicly for months about Virginia Tech's planned 145,000 square foot operation at the corner of North Glebe Road and Wilson Boulevard. Virginia Tech will own the building and will eventually employ up to 150 researchers, faculty and staff at the site. The property will include first-floor space for the Ballston Science & Technology Alliance. JBG's overall project will include about 414,000 square feet of office and retail space, 90 units of affordable housing, and 28 market-rate townhouses. Demolition started at this site in early June, and Virginia Tech officials hope to move into their building sometime in 2010.

Despite the lack of new construction in Arlington County, there was a 380,198 square foot building under renovation at the close of the second quarter. There are also plans in the pipeline for new renovation projects as well, which is in response to the Base Realignment Closure initiative. For example, Lowe Enterprises Real Estate Group is spending $28 million to renovate two towers it owns. Century Center is comprised of Century Center One and Two -13 story buildings consisting of 560,000 square feet of office space and 70,000 square feet of retail. Upgrades will include a refurbished lobby and public space, new entrances and extensive enhancements to the buildings' facades.

Like Arlington County, the City of Alexandria also saw vacancy rates stabilize, with rates ending the quarter at 5.1%, down slightly from a first quarter rate of 5.3%. Though there were very few vacancies in Alexandria during the second quarter, net absorption levels were low, with second quarter net absorption rates under 30,000 square feet.

While there were no second quarter deliveries to note, in Alexandria, there were two buildings, totaling 158,394 square feet under construction and one building, totaling 605,998 square feet under renovation. As of June 2008, there was less than 1.0% leased in the three properties under construction/under renovation.

It is no surprise that vacancy rates in Fairfax County have continued to increase, ending the second quarter at 13.9% from a first quarter rate of 12.4%. Contributing to the over one and a half% increase in vacancy in Fairfax County was American Management System's (AMS) vacancy of 210,630 square feet at 4050 Legato Road in Fairfax Center, as a result of the company's consolidation efforts after the company's merger with CGI, Inc. in 2004. On March 10, 2004, AMS entered into a definitive merger agreement with CGI Group Inc. and in May of 2004, AMS was merged into CGI. Other second quarter vacancies included Northrop Grumman's vacancy of 110,000 square feet at 12005 Sunrise Valley Drive in Reston.

The obvious downturn in leasing activity has also played a significant role in keeping vacancy rates from decreasing to healthier levels. And, any demand for commercial space in Fairfax County has also been weakened by a fast construction space. For example, of the 1.3 million square feet that was delivered during the second quarter of 2008, only 31.3% was leased at the close of the quarter. This is in comparison to the 821,834 square feet that was delivered during the first quarter with a lease rate of 50.9% at the close of March. Second quarter deliveries were located in Merrifield, Reston, Herndon, and Route 28 South, where overbuilding is a concern, with the exception of Merrifield. In addition to the delivery of 1.3 million square feet, during the second quarter, there is still 1.1 million square feet under construction in the County with a prelease rate of only 20.7%.

The increased number of renewals is also hurting the absorption of new projects. There just doesn't seem to be enough new job growth to create the demand that is needed to lease the new buildings that have recently come on line and are still in the pipeline to deliver. In an effort to remedy the overbuilding in Fairfax County, it has not been uncommon lately for landlords to offer sweet-deals in high-vacancy areas, like Route 28 South. We're starting to see some landlords offer six months of free rent and generous concession packages to lure prospective tenants. Bottom line, landlords in Fairfax County are doing what they can to get their space filled.

Among development plans in the pipeline, one of the most noteworthy is the expansion of Fort Belvoir. Workers have begun underground blasting in the first stages of a major expansion of Fort Belvoir, expected to add 19,300 more jobs to the government facility and give a major boost to the economy of southern Fairfax County. The base already is home to more than 100 Defense Department and other federal agencies. The 2005 Base Realignment and Closure process closed government facilities in other parts of the country and is bringing many of them to Belvoir, which is expected to reap the biggest gains of any Defense Department installation. Fort Belvoir has 23,000 military and civilian workers and will expand to more than 42,000 employees by 2011, probably exacerbating the area's traffic congestion. The biggest projects already underway as part of the expansion are the construction of a $747 million community hospital just inside the base's Pence Gate and the $1.7 billion relocation of the NGA from its suburban Bethesda neighborhood to the proving ground's rolling hills and woods, once a prime site for training Army combat engineers.

While renewal activity may be hurting the absorption of new office projects, it can't be ignored that renewal activity in Fairfax County has also aided in keeping real estate fundamentals solid during the second quarter. For example, Sprint Nextel renewed for 323,243 square feet at 2001 and 2003 Edmund Halley Drive in Reston, making it the largest lease of the second quarter in Northern Virginia. Furthermore, Argon ST, Inc. signed a renewal for 165,000 square feet at 12701 Fair Lakes Circle in Fairfax Center. There were also a handful of direct leases that will keep vacancy rates from increasing further, as these tenants occupy their new offices. For example, Network Appliance leased 66,877 square feet at 1921 Gallows Road in Tysons Corner.

Other second quarter lease signings in Fairfax County included the College Board's expansion of 50,075 square feet at 11955 Democracy Drive in Reston at the Town Center, increasing the firm's total occupancy to 180,075 square feet when the building delivers in late 2009. Reston Town Center is undergoing a makeover as Phase II of the urban core, from Library Street to Explorer Street, nears completion of the developer's vision for the property. With the South of Market development finished, construction started on 11955 Democracy Drive during the second quarter.

On the heels of Sprint Nextel's large renewal, another telecom firm in Reston, Simplexity LLC, signed a deal for 47,505 square feet of office space at Parkridge Center 5. The online provider of cell phones and wireless service is consolidating from multiple Virginia locations and has taken occupancy of its new space. The deal was signed for a five-year, six-month term.

Vacancy rates in Loudoun County also increased during the second quarter of the year to 24.4% from a first quarter rate of 23.3%. Contributing to the increase in vacancy was the 330,000 square feet that delivered during the second quarter, of which only 43.0% was leased at the close of June 2008. Additionally, there is 610,636 square feet under construction with a 0.0% prelease rate.

Despite the close to 25.0% vacancy rates in Loudoun County, there are also new development plans in the pipeline. For instance, developers for a 1.2 million square foot mixed-use project closed on a $217 million construction financing project during the second quarter. Cypress Equities, the development affiliate of the Staubach Co., Washington, DC-based Kettler, and private equity firm Carlyle Group closed loan proceeds for the Village at Leesburg project. Located at Route 7 and Crosstrail Boulevard, the Village at Leesburg will be a vertically-integrated, four-story development. The developers started work on the infrastructure in May 2007, with completion anticipated for Spring 2010. The only publicly revealed prelease for the development is Wegmans Food Market. Cypress Equities will develop the retail portion of the project, while Kettler will develop the office and residential components of the project including 335 luxury apartments. Under construction now is a $31 million interchange that will access the Village at Leesburg by bridging Route 7. It will have approaches to and from River Creek Parkway to the north and Crosstrail Boulevard to the south of Route 7. The interchange is expected to open in July 2009.

Like Arlington and Alexandria, vacancy rates in Prince William County also remained stable, as rates ended the second quarter of 2008 at 14.5%, down from a first quarter rate of 14.6%.

While leasing activity was minimal, construction was steady with the second quarter delivery of 104,000 square feet. Furthermore, there are three office buildings under construction in Prince William County, which total 228,559 square feet and are 49.9% preleased.

There are also plans in the works for additional development in Prince William County. For example, during the second quarter, IBM sold 46 acres of raw land in Manassas, Virginia, to Opus East LLC, with plans to develop a new office development known as George Mason Research Park at the site. The new five-building office campus would total 415,000 square feet, with the first building scheduled to deliver in the third quarter of 2009. The property, located at 8995 Ellsworth Road between Prince William Parkway and Godwin Drive, traded for $6.5 million, or about $141,300 per acre.

Though there remains a tremendous amount of renewal activity in Northern Virginia, the building boom has come at a time when demand is down and job growth is waning, particularly in the "outside the beltway" markets. Employment growth will be a key catalyst in how long these new buildings will remain vacant.