(as of June 30, 2009)
Jurisdiction
Current year
Prior year
Alexandria
16.2%
7.0%
Northern Virginia (1st quarter)
16.0%
13.3%
D.C. metro area
14.9%
12.0%
Source: Grubb and Ellis, City of Alexandria
The office vacancy rate in Alexandria has climbed to its highest level in more than five years, as the city has joined a growing list of jurisdictions in the area to feel the effects of a national slump in the commercial real estate market.
As a comparison, during the last severe downturn in the commercial real estate market in the early 1990s, the office vacancy rate peaked at over 21 percent, according to city documents.
City officials did point out that the 16 percent vacancy rate includes the Victory Center Building on Eisenhower Avenue, rendering the figure a bit misleading. The building was renovated and added back to the vacancy list during the first quarter by Grubb & Ellis, a commercial real estate advisory firm.
But the market is still trending downward. Commercial property assessments in the city are projected to drop from between 7.7 percent to 15.5 percent, with a likely drop of about 13 percent. The city is thus faced with likely service cuts — cuts that Councilman Rob Krupicka described as a “wake-up call” at the council’s recent budget retreat. Further, through August, the number of year-to-date commercial real estate sales were down 60 percent compared with August 2007.
“The commercial market is the unknown,” said Cindy Smith-Page, director of the city’s real estate assessment department.
Still, Alexandria is certainly not alone, and could actually fare better next year than its Northern Virginia neighbors. In Fairfax County, nonresidential property values are projected to drop by about 18 percent in 2011. Arlington County is anticipating a 14 percent decline in commercial assessments, and Prince William County is projecting a 25 percent drop in commercial values.
Nationally, commercial and multifamily mortgage loan originations for the third quarter were 12 percent lower than during the second quarter, and 54 percent lower than during the same period last year, according to the Mortgage Bankers Association.
“Tight credit conditions coupled with scant demand for new loans meant that commercial and multifamily mortgage originations remained low in the third quarter,” said Jamie Woodwell, MBA’s vice president of commercial real estate research.
