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WASHINGTON, DC–In a 216-212 vote, the House of Representatives passed a budget resolution on Thursday. It was a significant development as it allows for a fast-track procedure for Congress to approve tax cuts this year — and indeed, a draft measure is expected to be introduced on Nov. 1.

For the Washington, DC area the fact that a budget resolution passed is the big news — especially for Northern Virginia, which is expected to benefit handsomely from the 10% increase to the Department of Defense's base budget.

In a research note, JLL points out that such a boost would jumpstart leasing activity in Northern Virginia, which has experienced 5.4 million square feet of negative net absorption since 2012, driven by limited growth among a tenant base that is still largely comprised of government contractors. It also wrote that:

2017 is on pace to finish with the fewest contractor relocations or new leases > 20,000 s.f. in at least a decade –a total of six YTD vs. a peak of 40 in 2010.

Again, Sequestration?

But Michael Hartnett, JLL's senior research manager for Northern Virginia, also points out that the 2011 Budget Control Act prevents such a spending increase from taking effect. Lawmakers would have to suspend or revise the law's $549 billion cap in the defense base budget, a measure that led to sequestration and drove up vacancy in the market, he wrote in the research note. He predicts:

Democrats will likely support a deal to revise the cap and permit the increase to Defense if it is paired with a pullback in proposed cuts to non-Defense programs, leading to a win-win for the overall DC market.

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