Since 2009, the top 10 recipients of government technology contracts saw a steady decline from $71.3 billion in 2010 to $47.9 billion in 2015, for a 32.8% drop. But then in 2016 the trend began to reverse with a 1% year over year increase. [see chart].

That will likely continue this year, Homa says. “There is a general sense of optimism among government contractor CEOs that has been playing out in earnings and analyst calls, in forward looking guidance and in sentiment surveys.” JLL notes that the largest contractors were mostly positive on their 2017 outlooks, with four out of the top five projecting an average 2017 revenue increase of 4.4% versus an average annual decline of 0.6% over the last five years.

“That leads us to believe the area will be feeling a tailwind from improvements with government contracting,” he says.

In addition, Northern Virginia's office market has not only bottomed out but has posted seven consecutive quarters of positive absorption. In both 2015 and 2016 Northern Virginia recorded approximately 400,000 square feet of occupancy. “You need to go back to 2010 to find a half a million gain of net absorption,” Homa says.

2017 will likely see that high-water mark (at least for recent years) again because of the general momentum in the market and the optimism among government contractors. One sign the validates this forecast: the recently announced Nestle headquarter relocation.

“That alone will be 206,000 square feet,” Homa says.

ARLINGTON, VA–JLL is predicting that Northern Virginia's office market will see at least half a million square feet in occupancy gains this year, in large part because it believes that the five-year decline in government contractor awards has begun to reverse in earnest.

By itself this is a significant development, as government contractors account for more than 50% of Northern Virginia's office tenant base, Research Director Scott Homa tells GlobeSt.com.

There is more, though, that went into JLL's prediction.

First, let's start with the government contractors.

Since 2009, the top 10 recipients of government technology contracts saw a steady decline from $71.3 billion in 2010 to $47.9 billion in 2015, for a 32.8% drop. But then in 2016 the trend began to reverse with a 1% year over year increase. [see chart].

That will likely continue this year, Homa says. “There is a general sense of optimism among government contractor CEOs that has been playing out in earnings and analyst calls, in forward looking guidance and in sentiment surveys.” JLL notes that the largest contractors were mostly positive on their 2017 outlooks, with four out of the top five projecting an average 2017 revenue increase of 4.4% versus an average annual decline of 0.6% over the last five years.

“That leads us to believe the area will be feeling a tailwind from improvements with government contracting,” he says.

In addition, Northern Virginia's office market has not only bottomed out but has posted seven consecutive quarters of positive absorption. In both 2015 and 2016 Northern Virginia recorded approximately 400,000 square feet of occupancy. “You need to go back to 2010 to find a half a million gain of net absorption,” Homa says.

2017 will likely see that high-water mark (at least for recent years) again because of the general momentum in the market and the optimism among government contractors. One sign the validates this forecast: the recently announced Nestle headquarter relocation.

“That alone will be 206,000 square feet,” Homa says.