WASHINGTON, DC—The average asking rent reached $51.31 last quarter and the vacancy rate stabilized at 11.9%.
Fundamentals in Washington DC’s office market have shifted to the extent that Cresa believes it is turning into a landlord’s market in many sectors.
The average asking rent reached $51.31 last quarter after climbing for four consecutive quarters. Also, the vacancy rate has stabilized at 11.9%.
And in the Trophy market, a landlord’s market is all but already here.
The vacancy gap between Trophy space and Class A space widened last quarter, with Trophy reaching 9.7% and Class A at 12.7%. Rents rose as well with average Trophy office rents reaching $61.55 per square foot, a 27-cent year over year increase. In the CBD Trophy rents are at $90 per square foot.
Class B, meanwhile, has not seen a substantial decrease in vacancy since 2006.
But even outside of the Trophy market competition is tightening. The federal government will return to the market this year after a barely-there activity level in 2015. There is an estimated 24 million square feet of leases expiring in the DC metro area throughout 2018, which will cause the vacancy rate to drop substantially.
Some, but not all, of this pressure will be countered by an influx of “high-quality” space currently in the construction pipeline. There is four million square feet of space under development now – the most since 2008.
The driver behind these trends, of course, is the area’s job growth, which is now 40% higher than the five-year average. This growth has been led by the professional and business services, scientific and technical services, and legal services sectors. In 2015, these industries delivered a total of 9,700 new jobs.