600,000-SF Raytheon Deal a Rarity in Quiet Leasing Market

While Internet firm AOL and defense contractor Raytheon Co. would seem a strange pairing, the two firms have negotiated a real estate deal under which Raytheon will occupy 600,000 square feet at AOL’s Dulles, Va., office campus. The magnitude of the lease is especially notable given the downturn in leasing activity seen by the area–like many markets across the nation–since the recession has taken hold.Under terms of the deal, the defense contractor will occupy space in four separate buildings at Pacific Corporate Office Park, where AOL maintains a presence despite moving its headquarters to New York City last year. Waltham, Mass.-based Raytheon will consolidate a portion of its Virginia operations at the newly-leased space, moving in a reported 1,300 employees from two current locations in nearby Fairfax County in late 2010. Overall, Raytheon will shell out $37 million on renovations and build-out at its new digs. The firm was also considering Maryland and Washington, D.C., as possible relocation sites. The Virginia Economic Development Partnership worked with Loudoun County to secure the project for Virginia, securing a $500,000 grant from the Governor’s Opportunity Fund to build a new road near the office complex. In return, Raytheon has pledged to add 100 employees to the park over the next three years. CB Richard Ellis Inc.’s Cathy Delcoco, Rob Faktorow, Terry Reiley and Vicki Salamon represented AOL in the lease negotiations. The Raytheon lease comes in a market that has seen deals of this size dry up as of late, as many companies are downsizing and suffering financial troubles as a result of the slumping economy. The vacancy rate for Northern Virginia office space rose 40 basis points to 13.3 percent in the first quarter of 2009, according to a newly-released report by commercial real estate services firm Cassidy & Pinkard Colliers. The same report pegged first-quarter average asking rates in the market at $30.88 per square foot, a 4 percent drop over a year ago. Government and government-related tenants, though, such as Raytheon, are expected to remain a source of demand as a result of the economic stimulus efforts coming out of Washington. An estimated $7.5 billion in stimulus funding is marked for Northern Virginia agencies over the next few years.