WASHINGTON, DC–During their Q1 earnings calls, defense contractors told listeners that there has been a delay in contract awards by the federal government. Some of them suggested that this was due to the Trump Administration lagging in filling key positions. And it is true that for the majority of positions requiring Senate confirmation no one has been named.

Of the 557 positions that need to be confirmed, only 29 have been, while 73 are pending. Meanwhile no nominee has been put forward for 455 of the remaining positions.

JLL decided to see if there was a link between the lag in defense contractor awards and the slow crawl of nominee nominations. It quickly established that the Trump administration is lagging the previous four administrations in filling key executive branch positions.

It also confirmed that contractor awards have dropped. From February through April, for example, Northern Virginia contract awards are down 49% year-over-year. [See Chart Below].

Where's The Connection?

What it couldn't confirm was the connection between the two, JLL Senior Research Manager Michael Hartnett tells GlobeSt.com.

Without more precise data it is difficult to quantify what effect the slowdown of awards will have on Northern Virginia's commercial real estate market, which is heavily oriented to the defense industry.

“Our outlook still stands generally,” Hartnett says. “We expect the Trump Administration to spur leasing activity in Northern Virginia.”

Despite the hiring delay, the legislation to fund the government through September includes a 3.5% increase to Defense and $1.45 billion increase to Homeland Security But how much of that will translate into CRE gains remain to be seen — first the contracts must start to flow through the appropriate government management channels.

Not A Normal Administration

Normally this wouldn't even be a question.

Historically, tenant demand in the Washington, DC area has strongly correlated with the alignment of Congress and the Presidency, Hartnett explains.

Over the past 15 or so years, the Washington, DC office market has absorbed 36.5 million-square feet when Congress and the Presidency have been in alignment and lost six million square feet of occupancy when there has been division.

In short, political clarity is one of the most important predictors of office market performance.

Unfortunately this administration has not been one to provide much political clarity. Hartnett was unable to say if the historical positive net absorption will be at the same level in this political cycle as it was in others.

But there will be some gains, it is safe to say.

“The FY 2017 budget passed by Congress two weeks ago to fund the government through September should spur leasing activity among some sectors, however, including government contractors in Northern Virginia due to increases in Defense and Homeland Security,” he says.

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An Untypical Presidency Could Impact Northern Virginia's Outlook

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