Increased federal spending on cybersecurity could boost demand for commercial real estate in the greater Washington, D.C. metro area, a new report from CBRE Group, Inc. says.
The FY 2017 omnibus spending bill, signed into law on May 5, increases spending on cybersecurity by $183 million from FY 2016 to $1.8 billion.
Federal government contracting plays a vital role in the DMV region (District of Columbia, Maryland and Virginia), which receives 22% of all contract spending in the U.S. In Northern Virginia, the top 50 largest contractors alone account for 9% of the market’s total occupied office space, according to CBRE.
The CBRE report also identifies the Washington, D.C. region as one of the top recipients of cybersecurity venture capital in the U.S., which totaled $3.5 billion in 2016 and $3.9 billion in 2015.
Many of the firms specializing in cybersecurity are based in northern Virginia, including ManTech and LookingGlass Cyber Solutions, which have recently signed leases for office space.
“Increased federal spending on cybersecurity points to a potential uptick in activity for the industry, which could lead to more space demand in a market with a high concentration of cybersecurity firms,” says Wei Xie, CBRE’s Research Manager for the Greater Washington, D.C. area. “As home to the largest cybersecurity workforce in the U.S., the federal government, and many of its private defense and IT contractors, the Baltimore-Washington corridor stands to benefit from this.”
Northern Virginia is the region’s biggest hub for government contractors—many of which service the cybersecurity sector—with the top 50 largest contractors (“Top 50”) alone accounting for 11.3 million sq. ft. of the market’s total office space occupancy (8.6%) and 15% of the total leasing volume since 2010. As nearly 5 million sq. ft. of the Top 50 leases are set to expire within the next five years, increased demand in the cybersecurity industry will have a positive impact on market fundamentals.
In Maryland, Anne Arundel and Howard counties are expected to see steady leasing activity, especially for properties in close proximity to the National Security Agency (NSA) in Fort Meade and the BWI Corridor. The presence of established cybersecurity firms in areas such as Fulton and Columbia are driving additional space demand.
“In addition to federal spending, cybersecurity companies also benefit from a robust commercial market serving the private sector,” adds Xie. “Smaller, “pure play” firms have entered the market looking for first-time offices to accommodate their growth.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
