'07 4Q - Boston

MARKET SMARTMERRIFIELD‘074QQuarter in ReviewMerrifield experienced a quiet fourth quarter, asvacancy rates and rental rates remained mostlyunchanged and positive net absorption served to offsetmixed results during the first part of the year.Entering the fourth quarter with year-to-date absorptionof negative 132,236 square feet, Merrifield posted66,998 square feet of positive net absorption duringthe final three months of the year to close out 2007with a modest drop in occupancy. Despite the outflowof occupied space, market conditions remained tight,with direct vacancy rates 2.2% below those ofneighboring Tysons Corner.Merrifield’s direct vacancy rate increased 10 basispoints to 6.7% during the fourth quarter. A 38%reduction in sublease space on the market resulted ina 120 basis point decline in total vacancy rates, as72,093 square feet were removed from the market, andrates dropped to 9.0%.Nearly 60,000 square feet of sublease space wastaken off the market at 2701 Prosperity Drive, and justtwo blocks of vacant space greater than 50,000 wereavailable at the end of the fourth quarter throughoutMerrifield. The site of the largest contiguous block ofspace was also the location of the largest direct leasetransaction of the quarter: 3190 Fairview Park Drive,where DynCorp International expanded 24,000 squarefeet. XM Satellite Radio signed the largest overalltransaction of the fourth quarter with a 47,000 squarefoot sublease at 2650 Park Tower Drive.Average asking rents stalled in 2007, falling 17 centsduring the fourth quarter, but ending the year up 0.2%from year-end 2006 at $30.22 per square foot.Looking AheadGovernment contractors account for the largest shareof Merrifield’s tenant base, which explains why theslowdown in federal procurement spending is inhibitingactivity in the market. At the end of the fourth quarter,one office project was under construction, the 0%preleased 183,731 square foot Class A building at3120 Fairview Park Drive, which will deliver in April2008, marking the first addition to supply in Merrifield in28 quarters.SFKey Market IndicatorsSupply5,275,755 SFYTD Net Absorption-65,238 SFDirect Vacancy Rate 6.7%Total Vacancy Rate 9.0%Average Asking Rent$30.22 PSFUnder Construction183,731 SFNet Absorption, New Supply and Total Vacancy RateChange in Supply Net Absorption Total Vacancy1,000,000800,00035%30%600,00025%400,00020%200,00015%010%(200,000)5%(400,000)0%'00 '01 '02 '03 '04 '05 '06 '07Class A vs. B Average Asking Rental Rates$ PSF$35$30$25$20$15Class AClass BLonger term, with discussions of a Town Center projectunderway, Merrifield may create a new paradigm. Thetown center appeal would produce significant benefitsfor both tenants and landlords, increasing the amenitybase for tenants and drawing on a more diversifiedtenant base willing to pay premium rents for landlords.1801 K Street, NW Suite 1000 Washington, DC 20006 + 202.719.50001600 Tysons Boulevard Suite 1000 McLean, VA 22102 + 703.485.8800$10$5$0'00 '01 '02 '03 '04 '05 '06 '07www.joneslanglasalle-dc.com