FAIRFAX COUNTY’S CURRENT COMMERCIAL REAL ESTATE MARKET
Fairfax County’s commercial real estate market is solid. In this article, we will survey the market, based on previous overall results, highlight specifics for each market sector, and review the stats for commercial properties currently for sale.
Fairfax County government is focusing on nine priority areas to maintain what it refers to, in its strategic plan as “the county’s competitive advantage . . . routinely confirmed by regional, state, and national data measures.” The plan includes implementing flexible land development policies that keep pace with market conditions and reduce time to market, improve data-driven decision-making, and collaborate with the business community to explore innovative approaches. An obvious goal for Fairfax is to encourage investors to see the county as a major player in the Virginia real estate marketplace. With that simple introduction let us begin with the current investment property inventory.
COMMERCIAL INVESTMENT PROPERTIES CURRENTLY FOR SALE
There are 160 investment opportunities currently available (April 5, 2021) with a combined For Sale volume of $309 million totaling 2.4 million SF, and an average $/SF of $264. The market CAP rate averages 6.6%, ranging from 4.8% to 9.4%. Approximately 78% of these investment properties’ CAP rates are in the 5% to 8% range. Vacancy rates average 26.5%. The average Sale Price vs Last Sale Price is +99.9% based on a wide range, but with the highest recorded figure being +809.5%.
The market asking rent (based on 44 observations) averages $21.04/SF, ranging from $8.48 to $45. 70% of the properties are for sale by private owners, 12% institutional, and 18% by the user. Serafin currently ranks #2 on the Top Selling Broker list.
A THREE-YEAR REVIEW OF THE FAIRFAX COUNTY COMMERCIAL REAL ESTATE MARKET
We will now broaden our perspective and look at the market overall from Q2 2018. In the past three years, 659 investment properties were sold for a total dollar value of $12.4 Billion. The 51.4 million SF sold, averaged $223/SF, ranging from $5/SF to $4,853/SF. 57% of all sales were in the $2.1 to $24 million brackets, 23% sold in the $410K to $2.1M bracket, and 20% sold above $24M. The highest contract sale was $338M.
Closed sales price averaged 7.5% below asking price, falling to about 15% below in Q3 of 2019 and peaking at a quarterly average of a little over 2% above asking price in Q3 2020.
The lowest sales volume in a single quarter was Q1 2021 with approximately $230 million closed, while the highest quarter’s figures were Q4 2019 with $1.525 Billion in closed sales. This quarter also saw the lowest $/SF for any in the survey period. The highest $/SF for any quarter was Q4 2020 when it reached an average of $333.
The three-year CAP rate average was 6.3%, ranging from 3.6% to 11%. Almost 90% of all sales saw a CAP rate distribution of between 4% and 9%.
Looking at cumulative sales volume by year, 2019 was the strongest for sales, followed by 2020, with 2018’s cumulative sales finishing not far behind after a steady climb from May to November and a steep rise to close the year. Interestingly, 2021’s first-quarter sales volume is very close to Q1 2018. While no one has a crystal ball, given the COVID-19 vaccination success rate and the proposed infrastructure Bill before Congress, if 2021 were to emulate 2018’s success, this would be an excellent time for commercial real estate investors to look closely at Fairfax and the other opportunities in Northern Virginia.
If we look at buyer types, 50% of all purchases were private organizations, 22% institutional, 14% private equity, 11% REIT, and 3% user. 71% of them were national names, 27% local, and 2% of buyers were of foreign origin. Let us now proceed to the property investment market stats by sector.
FAIRFAX COUNTY CRE INVESTMENT PROPERTIES BY SECTOR
Office Space
This sector includes both multi and single-tenancy properties. 242 properties sold at an average price of $17,908,836. The median price was $8 million. Price per SF ranged from $5.48 to $1,752.65, averaging out at $195.91/SF with a median of $199.48. The actual CAP rate averaged 7.58% on an average RBA of 80,324 SF. Sales Price to Asking Price (SP: AP) averaged 94.59% but with a very broad spread of just under 78% to a high of 195.56%. The average days on market (DOM) was 367, with one property going under contract in 4 days.
Flex
55 properties in this sector sold for an average price of $7,825,083 and a median price of $6,875,792. $/SF averaged at $155.72. Again, there was a widespread, going from $50.51 to a high of $451.39 on an average RBA of 47,785 SF. The actual CAP rate averaged 7.9% and with a narrow range of only 1.8% between the lowest and highest The average SP: AP was 90%
Industrial
52 properties were sold at an average price of $9,230,143 and a median of $7,155,864. $/SF averaged $154.30 and a median running close at $151.19 on an average RBA of 53,881 SF. The actual CAP rate ranged from 4.5% to 7% with an average of 5.75% and a median of 5.76%. SP: AP averaged 93.90% and the average DOM was only 130, with one property selling in 48 days.
General Retail
99 properties changed hands for an average SP of $12,285,809 and an average SF of 28,257 equating to a $/SF of 490.37. The actual CAP rate averaged 6.28%, the median was 6.43%, and ranged from a low of 4.64% to a high of 8.18%. SP: AP averaged 97.01%, with one property selling for 153.85% of the asking price.
Sports and Entertainment
1 property of 16,452 SF was sold for $23,750,000.
Multi-Family
53 properties were sold for an average price of $85,042,314. The SP and SF ranged from $90,000 to $337,796,660 with square footage ranging from 900 to 1,218,966. Unit sizes ranged from 6 to 1,387 units, and the price paid per unit averaged $270,121 with a maximum unit price of $435,211. While the S/SF averaged $255.04, it ranged from $30.57 to $636.74. The actual CAP rate also covered a broad range, from 3.6% to 10% averaging 5.11%. The average DOM was a little over 3 months.
Hospitality
28 properties were sold for an average price of $17,854,317. There was a wide variation in terms of property size. The smallest building had 26 rooms, and the largest 396. The building size was 8,743 SF at the low end and 309,113 SF at the high end. The average S/SF was $173,321, giving an average price per room of $116,968. The average CAP rate was 8.07%, going from a low of 6.75% to 9.2%.
Vacant Land
97 parcels were sold with an average sale price of $8,425,871. Again, there was a wide range with the smallest parcel being a little over 5,200 SF and the largest almost 123.5 acres. The average parcel size was 5.98 acres, and the average price per acre was $1,350,834. Again, the spread went from $66,330/AC to $24,494,855. DOM also ranged from a speedy 17 days to 8,174, and an average of 844 days. SP:AP averaged 92.41%, ranging from 63.36% to 122.73%.
Health Care
5 properties were sold at an average price of $21,873,435. The lowest contract price $10,140,000 and the highest $40,741,000. Building sizes ranged from 27,501 SF to 362,231, giving an average $/SF of $181.33.
Specialty
3 properties in this sector changed hands at an average price paid of $10,227,881. The prices ranged from $4,375,000 to $21,700,000. Building sizes also went from 4,250 Sf to 79,833 giving an average $/Sf of $334.31. Actual $/SF ranged from a low of $271.82 to a high of $1,084.39.
SUMMARY POINT
Fairfax County offers a wide range of commercial real estate investment opportunities. Each of the ten sectors we have covered includes properties of different sizes, locations, price points, and CAP rates, so finding a specific property to meet specific user or investment objectives looks very much on the cards. In our March article, which focused on Loudoun County real estate investment market, we described the typical commercial leases common in the area. These lease types are also common to Fairfax County if you would like to review them.
Our current inventory gives an insight into Fairfax investment opportunities introducing potential investors to what is available or acting as the basis for a more in-depth discussion about specific goals and plans. As a leader in Virginia’s real estate investment market, we are on hand to begin specific searches for properties that will meet your operational or investment needs. Please click this link Serafin Real Estate, scroll down to leave your details, and we will get back to you immediately. If you prefer, please call us directly on (703) 261 4809.