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NORTHERN VA-The situation in Northern Virginia’s industrial real estate market is grim but not fatal, according to a recent report by real estate group REIS, Inc. The organization forecasts the area’s vacancy rate to increase to 10.4% by year’s end; up from 7.4% at the end of 2000.

“We’re anticipating a lot of extra supply in this market in terms of supply versus demand,” REIS Senior Consultant Andrew Wright tells GlobeSt.com. “There’s more construction there than we’ve seen in about 10 years.” The Northern Virginia market encompasses Fairfax and Eastern Loudon counties where there has been a great deal of hi-tech industry growth over the past several years. Now the region is feeling the effects of the bottom falling out of the once booming dot.com industry.

“Demand has indeed been waning in the past few years,” Wright says. “People are deciding they don’t need as much warehouse space. That puts a softening spin on the market.” The Northern Virginia region–which sits along the I-66 and Highway 28 Corridors–comes in third behind Silicon Alley and Boston’s Route 128 Corridor on the list of the nation’s largest high-tech hubs. But area companies such as Covad and Teligent have recently scaled back, leaving the region with a slew of empty warehouses and offices.

Low vacancy rates spurred the demand for quite some time, now demand has dropped off substantially. About 1.9 million sf of space will have been delivered by the end of 2001 and REIS anticipates 3,000 sf of absorption, which Wright says is hardly fatal. “We’re forecasting a low amount of absorption,” he says, “it’s a drop in the bucket.” He also points out that the real estate markets are constantly in flux. In comparison with the nation as a whole, the Northern Virginia region is not completely off the charts. REIS expects the vacancy rate at the national level for the year ending 2001 to be about 9.9%. Wright notes that “the big difference is the change from the end of 2000 to year’s end 2001. The US went from 8.1% to 9.9%; suburban Virginia went from 7.4%to 10.4%.

Wright notes that there is a chance for recovery in the region, however. The defense industry is picking up steam in light of the recent terrorist attacks, and warehouse space will be in demand due to growth in and around Dulles International Airport.

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