Declining Interest in Office Buildings Drives Push for Fresh Approach

July 14, 2025 | By ARLnow

As interest in building and renting many varieties of office space declines in Arlington, more focus is falling on creative solutions.

Only a single new office building is currently under construction in all of Northern Virginia — although demand for offices with at least 50,000 square feet of space remains relatively strong, according to a new office market report from CBRE Research.

Given heightened construction costs, office vacancy rates and economic uncertainty throughout the region, experts foresee a continued shift toward redevelopment and adaptive reuse projects that repurpose former office space for housing or other uses.

Though some tenants continue to seek out large office spaces and top-quality buildings, overall, researchers don’t expect demand for office buildings to return to pre-pandemic levels anytime soon.

“All products become obsolete over time and office buildings are no different,” Stephanie Jennings, CBRE research director for the Mid-Atlantic region, told ARLnow. “Buildings that have fallen out of favor with tenants stand to contribute to their local economy and community as alternate uses, whether through tear-down and new construction or conversion of an existing building.”

Declining demand and challenging economics

More than a quarter of all office space in Arlington — 26.6% — was vacant in Q2, according to CBRE. That’s one of the highest rates in Northern Virginia, which has an overall office vacancy rate of 23%.

At the same time, there is only one commercial building under construction in the region: a 35,000-square-foot office building that Kite Realty Group is constructing as part of the One Loudoun development near Route 7 in Ashburn.

Arlington’s office vacancy rates have remained high for some time, especially on the more affordable end of the market, Jennings said.

“Some buildings have had high vacancy rates for several years, and are probably becoming functionally obsolete,” she said. “These buildings impact a municipality’s tax revenue and the vibrancy of the surrounding area.”

Still, Jennings pointed out that the trend doesn’t hold across the board. For instance, according to the CBRE report, at least 33 tenants are currently seeking Northern Virginia office spaces with at least 50,000 square feet.

This level of demand is “strong, but not unusual,” Jennings said. For some employers, top-quality office buildings with efficient layouts in vibrant neighborhoods remain very much in vogue.

However, constructing more of these buildings is unusually difficult these days. Construction and financing costs shot up during the pandemic and have come back down “very, very, very slowly,” Jennings said.

So while some employers are still seeking out trophy offices, new construction of any kind rarely pencils out. Jennings estimated that the construction pipeline for office space is at a 30-year low, at least.

These issues extend nationwide.

“Many of the trends driving the DC Metro are playing out in markets across the country, including a polarization of the market (i.e. top-quality space performing well while the more affordable segment is weak), flight-to-quality (tenants moving into higher quality space), and densifications (some tenants taking less space),” Jennings said.

Possible solutions for Arlington

Jennings underscored the need for localities to seek out creative solutions to office vacancies, like replacing older office buildings with products that are more in-demand.

“Removing these buildings from the office market would improve the office vacancy rate,” she said. “And repopulating them with another use improves an area’s vibrancy, which in turn creates a more appealing area for other proximate office buildings.”

Redeveloping, repositioning and repurposing less competitive buildings is “a key priority for Arlington,” Arlington Economic Development Director Ryan Touhill told ARLnow.

“The County’s focus is on areas we can influence, like marketing Arlington to employers and supporting building owners as they attract and keep tenants,” he said. “We also work to help owners reposition, adaptively reuse, or redevelop outdated buildings so our commercial spaces stay competitive.”

Touhill noted that almost 80 office buildings in Arlington have at least 50,000 square feet of available office space, though they vary in layout, location and overall quality.

Additionally, Touhill said that the demand for “trophy space” may eventually lead to the development of more top-quality offices like Amazon’s HQ2.

“Because new construction is typically the only option to meet that demand, we have observed renewed interest in entitlements for new office construction,” he said. “Future construction in strategic locations will likely be pursued by owners only when they have secured an anchor tenant interested in a build-to-suit opportunity.”

Touhill said that the slowdown in new office construction demonstrates the need for fresh approaches.

“This ongoing trend highlights the importance of rethinking how we use older office buildings that may no longer meet modern needs,” he said. “Working with owners to adapt or redevelop outdated properties will remain a strategic priority for Arlington in the foreseeable future.”

The cost of Arlington office space

CBRE’s figures on Arlington’s office spaces incorporate data from 139 buildings totaling 32.8 million square feet, most in the Rosslyn-Ballston and National Landing corridors.

In the R-B corridor, the 94 buildings in the report total 21.3 million square feet of space, with a vacancy rate of 25.2%. In National Landing, there were 35 buildings totaling 10.5 million square feet, with a vacancy rate of 28.7%

Average gross asking rents for the quarter were $44.66 for Rosslyn-Ballston, $43.76 for National Landing and $43.70 for Arlington overall, the report noted.

The report said that the General Services Administration signed two Arlington lease extensions during the quarter:

A 12-month extension was signed for Department of Homeland Security space at 4601 N. Fairfax Drive in Ballston

A long-term extension was signed for the Department of Defense at 241 18th Street S. in Crystal City

Across Northern Virginia, the overall vacancy rate for the quarter stood at 23% for about 1,240 buildings totaling 145.8 million square feet of leasable space.

The average gross asking rent was $37.70 per square foot for the quarter, but higher for more prestigious buildings, the report said.

“While A+ asking rates remained flat at $45.97 per square foot, ‘trophy’ asking rates rose to a new high of $62.72 per square foot,” CBRE analysts write.

The report noted that with the delivery of Comstock’s 205,000-square-foot 1880 Reston Row project, there are no other “trophy”-level buildings under construction in Northern Virginia.