As we reach the end of a year, it is always good to review past CRE activity to give us some perspective before we look ahead to next year. In this article we will compare 2019 and 2020’s stats in both Loudoun and Fairfax Counties. In this way, we can see how different sectors performed. We will round numbers up and down a little for easier reading. We will look at total sales, buyer types, CAP rates and rental rates.


Sales overall, in 2019 were $2.925 billion and involved 132 properties. In 2020, sales were $1.36 billion, down by about 46% and involved 59 properties. 2019’s major buyers were REITs, which purchased $1.4 billion during the year. Purchases were low in the first three quarters, but Q4 delivered $1.1 billion in closed transactions. This contrasts sharply with 2020’s REIT purchases of $62.5 million, all of which were closed in Q1.


Institutional Buyers in 2019 closed on $1.2 billion, with Private Equity and other Private Purchasers closing on $250 million each. 2020’s Institutional Purchasers closed on $263 million, all in Q1 and Q4. Private Equity contracts totaled $69 million, Private Purchase contracts totaled $463 million with 86% of them closing in Q3 and Q4. Purchasers designated “Users” closed on $110 million.


35% of 2019’s Buyers were REIT/Public, 30% were Institutional, 25% Private, 6% Private Equity, and 4% User. In 2020 the numbers were: 58% Private, 31% Institutional, 6% User, and 5% Private Equity.


If we compare price paid per SF, we see that Individual Purchases began 2019 at an average of $825, falling consistently until Q3, then rising from its low of $350 to finish the year at a $475 average. 2020’s Individual Purchases began the year at just above $400 per sq ft, rising sharply in Q2 to $930, falling in Q3 to $865, and finishing the year at about $250 on sales of $160 million. Portfolio Purchases price per SF began the year on a par with Individual Purchases but, instead of rising, the price slipped steadily to end the year at $250 on a Q4 purchase figure of $45 million.


2019 began with an average CAP Rate of 6.8%. Q2 saw a rise to 7.8%, Q3’s CAP fell to 6.5%, and the year ended back at an average of 6.8%. A simple summary for 2019 tells us that 73% of purchased properties recorded a CAP Rate of between 5% and 8%. The rate continued to rise in 2020, with Q1 averaging 7.35%. Q2 began at 7%, falling in Q3 to average of just over 5.8%, then rising to end the year at 7.05%. The same summary shows that 70% of 2020’s purchased properties recorded CAP Rates of between 6% and 8%.


Direct Rental rates were fairly consistent in 2019. Q1 began with an average of $19.50 per SF, rising to $21 in Q2 and stabilizing at approximately $21.33 for the next six months. 2020 began with an average rent per SF of $21.50, rising in Q2 to $22.66, rising again to $22.80 in Q3, and it looks like Q4 will close at $21.80.

Sublet Rates varied quite a lot in the two years. 2019’s Q1 averaged $18 per SF, rising in Q2 to $20, continuing in Q3 to reach $22.66 and peaking at year-end at an average of $26 per SF. 2020 began at $26.80, dipped in Q2 and ended Q3 at $25.33. Q4 is averaging below that at $21 per SF.


2019’s occupancy rate began with a quarterly average of 91%, rising to 92%, dipping to 90% in Q3 and ending the year where it began. 2020 continued the pattern, beginning at 91% as expected. From Q2 onwards, occupancy has stood at 92%.

Time to lease has varied from 6 months at the beginning of last year, peaking at 22 months in Q2 and ending back at 6 months. 2020 rose from 6 months to 14 months in Q2, falling to a 12 month average in Q3, and we expect Q4 to end at an average of 18 months.


2019’s sales totaled $4.7 billion involving 245 properties, almost double 2020’s overall figure of $2.7 billion and 121 properties. Most business in 2019 was with Private Buyers, who closed on $2.65 billion for the year. Institutional Buyers purchased $825 million, Private Equity firms $650 million. REIT/Public transactions totaled $325 million. In 2020 Private and Institutional Buyers closed most business.


56% of all closed transactions in 2019 were with Private Buyers, 21% were designated Institutional,13% Private Equity, 7% REIT/Public, and 3% User. Q1 and Q2 sales each totaled about $1.2 billion, while Q4 was the busiest period, with $1.55 billion in closed transactions. In 2020, Private buyers closed on 44% of the total, 33% were Institutional,11% Private Equity, 10% REIT/Public, and 2% User. Most closed volume took place in Q1. Q2 was a quiet month with a relative surge in Q3, and Q4 finishing just below Q3’s totals.


Looking at price paid per SF, we see that in 2019 Individual, as opposed to Portfolio sales, began the year with an average of $200 per SF. It rose in Q2 to $280, dropped to $260 by the end of Q3, and fell again to end the year at an average sales price of $220. Portfolio purchases hovered at just above or just below $200 per SF for the first half of the year, slipped to $160 in Q3 and ended the year at about an average of $100 per SF. 2020’s figures tell us that, overall, sales price per SF started the year at $325, fell in Q2 to $165, then to $135 in Q3 but rose quickly to end the year at $225 per SF.


2019’s CAP rate began at 7.25%, falling in Q2 to just below 6.5%, dipping slightly again to 6.25% in Q3, and ending the year at slightly below 7.25%. 85% of property transactions recorded a CAP rate of between 5% and 8%. 2020 Q1’s average CAP rate stood at just below 7.4% slipping to 7.2% at the start of Q2. Q3 began at 6.5% with the year ending at around a straight 6%. 70% of all sold properties fell into the CAP rate range of 6% to 8%.


Direct Rental rates were fairly stable in 2019. The year began with a rental rate per SF of $22, slipping just below that in Q2, then steadying for the rest of the year at $21.50. The end of Q4 saw a rise in the rate, and 2020 Q1 began at $22.75 per SF. The rise continued throughout the year, going from $23.50 in Q2 to $24 at the start of Q3 and to an average of $24.25 at the beginning of Q4.

Sublet Rental rates per SF were at $18 for the first two quarters of 2019, rising to $20.75 in Q3, but dipping back to end the year at $19.75, which is where 2020 began. Q2 saw the rate dip to an average of $19.50, then to $18 at the start of Q3 and again in Q4 to $16.50 at the time of writing.


2019’s occupancy rates were steady, beginning the year at 71%. This figure held, within fractions of a percentage point until Q4, when occupancy rates rose to 72%. 2020 began at 72% and rose in Q2 to 73%. This figure then held but with minor changes through Q4.

Time to lease varied in 2019 from 10 months at the beginning of the year, rising to 14 months in Q2, then up again in Q3 to 15 months, then falling dramatically to 5 months in the first half of Q4. 2020 Q1 saw the time to lease rise to 20 months. Q2 rose to 60 months, falling to 20 in Q3 and up again in Q4 to 29 months.


Our CRE market in both counties is active. 2020, for obvious reasons, saw unit volume and dollar value contract compared to 2019. Interestingly, if we just look at CAP Rates, we see that 2019 in Loudoun the rate ranged from 6.5% to 7.8%, a spread of 1.3%. In 2020, it ranged from 5.8% to 7.05%, a spread of 1.25%. This equates to a total spread across all eight quarters of 2%. CAP Rates in Fairfax ranged from 6.5% to 7.8% in 2019, a spread of 1.3%, and from 5.8% to 7.35% in 2020 (1.55% spread) The total spread across all eight quarters also comes out at 2%.

We anticipate strong, positive trends in 2021. A new Federal administration, COVID-19 vaccines, new economic stimulus measures, and a positive world outlook should all support our counties’ established businesses leading to greater demands for commercial real estate properties.

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