(Alexandria, VA) – Nearly all local economic indicators showed signs of slow but steady improvement in the City’s economy in the third quarter. A detailed report is available online at http://www.alexecon.org/leirs.html.

Unemployment

Unemployment continued to creep down to 3.5% in the third quarter, from a high of 3.9% in the fourth quarter 2001. Unemployment was also down in the third quarter both state-wide and nationwide, though still far from the remarkably low 1.6% statewide unemployment rate in the fourth quarter 2000. Although this analysis is primarily concerned with the third quarter, it is interesting to note the national unemployment rate spiked up from 5.4% in September to 6% in November.

Possibly reflecting a higher than normal degree of highly-paid workers collecting unemployment, paid unemployment benefits are up more than 130% from third quarter 2001. The noticeable upturn in paid unemployment benefits first occurred in the fourth quarter 2001; compare benefits paid within a similar time frame in the previous year, and benefits are up more than 300%.

Office Market

Office vacancies have been dropping slowly but steadily from a height of 12.1% in first quarter 2002 to 10.7% in the third. Class A advertised rental rates are down, however, to the lowest point since third quarter 2000, when the rate was $28.36.

The overall state of the Alexandria office market is healthy, with a low 8.2% vacancy rate in Old Town, and 4.1% in the Eisenhower Avenue submarket. The bulk of the vacancy in Alexandria can be attributed to a few large vacancies in the I-395 corridor, which due to Alexandria’s relatively small office market, skew the numbers substantially.

For the rest of the Northern Virginia office market, companies continue to downsize, and product caught in the construction pipeline continues to deliver, resulting in a 100 point increase in the third quarter to a 16.9% vacancy rate for the Northern Virginia region. Washington, DC hasn’t fared much better – according to Grubb & Ellis the city posted negative 781,000 square feet of net absorption in the first three quarters of 2002, and has a vacancy rate of 12.8%.

Retail Sales

Retail sales continued to climb in the third quarter, despite media commentary suggesting otherwise. In fact, retail figures were up 11% over third quarter last year in Alexandria, and 2.3% statewide, although sales figures were weak in the third quarter last year, even prior to the terrorist attacks.

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Alexandria Second Quarter Economic Indicators

December 12, 2002

Retail sales have traditionally followed a trend in Alexandria: sales figures have been weak in the first quarter, followed by stronger numbers in the second quarter “tourism season,” weak again in the third quarter, and finishing strong for the holiday season. For the first time in at least six years, third quarter retail numbers exceed ed those of the second quarter.

According to George Mason University economist Stephen Fuller, “In the third quarter, homeowners who refinanced their mortgages brought a lot of cash into the market in June, July and August, when the rates hit the bottom, so big-ticket furniture and home appliance sales were up substantially.”

Whether the fourth quarter holiday shopping season will surpass the third quarter figures as in years past remains to be seen.

Residential Market

The prime interest rate remains 4.75%, exactly half of what it was two years ago in the third quarter of 2000. Low interest rates continue to fuel the residential housing market, though as is typical in the fall, residential real estate prices dipped slightly from the peak of the prime home-selling months in the summer.

The rental vacancy rate remains low at 1.6%, with an effective rental rate of $1,165 – exactly what it was in the third quarter a year ago, after a brief dip to a low of $1,113 in the first quarter of 2002.

Metro Ridership

Of Alexandria’s four Metro stations, the King Street station is the only station that has seen a continuous increase in ridership for the last several quarters; the increase averages between five and seven percent per year. Traffic at the Van Dorn and Braddock Road stations are down this year over last, with only a slight increase in activity at the Eisenhower Avenue station.

Construction Update

Construction began on three properties in the third quarter: 1229 King Street, a 14,762 square foot building being developed by Bonitt Builders, will be partially leased by the Inns of Court, a not-for-profit association affiliated with the legal profession; in addition, two more buildings are under construction for the U.S. Patent & Trademark Office at 401 and 600 Dulany Street.

This quarterly analysis of the economic strength of the City of Alexandria is part of the Local Economic Indicators Report, released by the Alexandria Economic Development Partnership, Inc. (AEDP). This report is prepared as a service to the business community to provide information on the health of the City’s economy for new, relocating and expanding businesses. Additional copies of the complete report may be obtained from the AEDP offices at (703) 739-3820 or at http://www.alexecon.org/leirs.html.

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For Immediate Release- 12/13/02

Contact: Marc Brambrut,
703-739-3820 xt. 12

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