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Washington is Still a Tenants Market

Posted on 30 June, 2013 by Jodee Redmond

Commercial real estate leasing in the Washington D.C. area was limited during this quarter. Vacancy rates were on the rise, according to preliminary data collected by CBRE Group Inc.

CBRE stated, “While the overall economy continues to show positive markers, office markets in the District, Northern Virginia and Suburban Maryland remain stalled in a period of listless activity, dampened by a push for greater office efficiencies and federal budget concerns.”

The level of leasing activity remained stable in the second quarter compared with the previous three months. However, figures have dropped 25 per cent from where they were one year ago. As companies are looking toward becoming more efficient, they are leasing less square footage, according to CBRE.

In anticipation of the full report on leasing activity in the second quarter, CBRE has released the following highlights:

• Demand for space remains lukewarm in the District as fewer large tenants are in the market. A number of federal leasing prospectuses are waiting for congressional approval. The second-quarter vacancy rate dropped to 10.2 per cent due to slight growth in smaller businesses and several lease renewals. Rental rates in Washington did not change, and concessions are above historic averages.

• Northern Virginia vacancy rates increased to 16.2 per cent, surpassing the previous record of 16 per cent in 2002. These numbers were driven by tenant consolidations and moves. Tenants in Northern Virginia paid $1.00-$2.00 less per square foot for rent. The Dulles Road area was able to provide especially favorable rates for tenants.

• Suburban Maryland saw vacancy rates increase to 16.9 per cent. The drive toward fewer government contractors and smaller federal offices led to lower demand for leasing.

The largest leasing transaction in the Washington D.C. area was the renewal of the Secret Service lease for 78,700 sq ft of space in the East End. According to CBRE, no leasing transaction in this three-month period was for more than 100,000 sq ft.

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