"We're anticipating a lot of extra supply in this market interms of supply versus demand," REIS Senior Consultant AndrewWright tells GlobeSt.com. "There's more construction there thanwe've seen in about 10 years." The Northern Virginia marketencompasses Fairfax and Eastern Loudon counties where there hasbeen a great deal of hi-tech industry growth over the past severalyears. Now the region is feeling the effects of the bottom fallingout of the once booming dot.com industry.

"Demand has indeed been waning in the past few years," Wrightsays. "People are deciding they don't need as much warehouse space.That puts a softening spin on the market." The Northern Virginiaregion--which sits along the I-66 and Highway 28 Corridors--comesin third behind Silicon Alley and Boston's Route 128 Corridor onthe list of the nation's largest high-tech hubs. But area companiessuch as Covad and Teligent have recently scaled back, leaving theregion with a slew of empty warehouses and offices.

Low vacancy rates spurred the demand for quite some time, nowdemand has dropped off substantially. About 1.9 million sf of spacewill have been delivered by the end of 2001 and REIS anticipates3,000 sf of absorption, which Wright says is hardly fatal. "We'reforecasting a low amount of absorption," he says, "it's a drop inthe bucket." He also points out that the real estate markets areconstantly in flux. In comparison with the nation as a whole, theNorthern Virginia region is not completely off the charts. REISexpects the vacancy rate at the national level for the year ending2001 to be about 9.9%. Wright notes that "the big difference is thechange from the end of 2000 to year's end 2001. The US went from8.1% to 9.9%; suburban Virginia went from 7.4%to 10.4%.

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