'07 4Q - Boston

MARKET SMARTARLINGTON COUNTY‘074QQuarter in ReviewArlington County recorded 314,315 square feet ofpositive net absorption during the fourth quarter, morethan double that of any other Northern Virginia city orcounty, and a validation of the strength of the marketinside the Beltway.Key Market IndicatorsSupplyYTD Net Absorption31,997,656 SF239,712 SFMove-ins by DFI International and Strategic Analysis, arenewal by the U.S. Army Corp of Engineers, andexpansions by System Planning Corporation and theU.S. Environmental Protection Agency highlighted theleasing activity that helped Arlington County capture a70.0% share of Northern Virginia’s net absorption in thefourth quarter.The delivery of the 94% leased 4075 Wilson Boulevardcontributed 147,066 square feet of absorption to thearea’s occupancy total, and reflected the vitality of themarket. Preleasing activity remained exceedinglystrong in Arlington County, and large blocks of spacewere in short supply. Direct vacancy rates fell over afull percentage point in 2007, from 9.7% in the fourthquarter of 2006 to 8.4% in the fourth quarter of 2007.SFDirect Vacancy Rate 8.4%Total Vacancy Rate 9.6%Average Asking Rent$35.30 PSFUnder Construction1,575,432 SFNet Absorption, New Supply and Total Vacancy RateChange in Supply Net Absorption Total Vacancy1,500,00025%The removal of 353,000 square feet of supply in theClarendon/Courthouse submarket due Verizon’s moveoutand the renovations at 1310 N. Courthouse Roadreduced year-to-date net absorption in ArlingtonCounty, but the decline was offset by consistent leasingactivity across all other Arlington County submarkets,especially Ballston. Ballston registered 156,452 squarefeet of positive net absorption during the fourth quarter,the 13 th consecutive quarter of positive net absorption,and the most of Northern Virginia’s 30 submarkets.Looking AheadTight market conditions in Arlington County shouldpersist, as limited existing blocks of space and aboveaveragepreleasing at new deliveries keep vacancyrates compressed. Average asking rental rates atselect new developments, such as Central Place and1812 N. Moore Street are pushing into unprecedentedterritory, due to the vitality of Northern Virginia’s insidethe Beltway market and the soaring rents and razor-thinvacancies at D.C. Trophy properties.Average Class A space in Arlington County remains ata 47% discount relative to comparable product in theDistrict’s East End and CBD. The value proposition ofArlington County has led over 1.5 million square feet oftenant demand in D.C. across the river over the pasttwo years, as tenants continue to make strategicdecisions to save on their operating expenses byvacating the city and establishing a new presence inArlington County.1,000,000500,0000(500,000)(1,000,000)(1,500,000)(2,000,000)'00 '01 '02 '03 '04 '05 '06 '07Class A vs. B Average Asking Rental Rates$ PSFClass AClass B$40$35$30$25$20$15$10$5$0'00 '01 '02 '03 '04 '05 '06 '0720%15%10%5%0%1801 K Street, NW Suite 1000 Washington, DC 20006 + 202.719.50001600 Tysons Boulevard Suite 1000 McLean, VA 22102 + 703.485.8800www.joneslanglasalle-dc.com