Mid-Atlantic Research Reflections 2024: Aerospace and Defense

The five largest American defense contractors are headquartered in the D.C. region, and the United States Department of Defense (DoD) spent $106.7 billion on grants, contracts and payroll across the Washington, D.C. Metro in FY 2023. This marks a 6.3% increase in total defense spending across the three states year-over-year and gives Greater Washington a 17.5% share of national defense spending.

Defense spending in Virginia—a national hub for the aerospace and defense (A&D) industry—grew 9.3% year-over-year, ranking second in defense dollars spent ($68.5 billion) among U.S. states. Further, the state ranks first for defense spending as a percentage of state GDP (9.7%). Washington, D.C. and Maryland also rank as top-10 states for defense spending as a percentage of GDP, ranking sixth and seventh, respectively.

Given these metrics, the A&D industry is a key driver of real estate activity across Greater Washington. Year-to-date, A&D tenants have leased 1.1 million sq. ft. across the Washington metro, with 75% of all activity concentrated in Northern Virginia. Regional leasing levels are down slightly from this time last year and are currently 13% below the long-term annual average leasing volume. In Northern Virginia absorption has trended positive, with the market recording 122,000 sq. ft. of occupancy gain through Q3 2024.