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Office Market Snapshot

Washington, DC Third Quarter 2013

Market Tracker
*Arrows = Current Qtr Trend


Net Absorption
121,000 SF

138,600 SF

Asking Rent
$49.43 FS

Market Conditions Remain Flat as Federal Government Kicks the Can Down the Road
Despite improving economic conditions, the District of Columbias office market showed meager gains in the third quarter of 2013. Net absorption was 121,100 square feet (sf) for the quarter, bringing the yearto-date total to 490,800 sf. At this point, it is highly unlikely the District of Columbia will reach its historic average yearly absorption total of 1.6 million square feet in 2013. For both government and private sector tenants, renewals accounted for the majority of leasing activity during the third quarter, with a few modest expansions. The largest third-quarter government transaction was the Bureau of Economic Analysis renewal for 146,000 sf at 1441 L Street, NW. Government leasing activity has picked up since the second quarter during which a single renewal was the sole government transaction. However, the increase in activity did not account for any growth, as all but two of the eight deals signed by the federal government in the third quarter were short-term renewals and both agencies that inked new deals took less than a full floor of space. The Pretrial Services Agency signed for 10,500 sf at 90 K Street, NE and the Bureau of Land Management leased 10,000 sf at 20 M Street, SE. In the private sector, seven of the top ten largest transactions were renewals. The largest non-renewal deal of the quarter was signed by Berkeley Research Group which leased 57,500 sf at 1800 M Street, NW, nearly doubling its current footprint at 1919 M Street, NW. Another notable transaction was AT&Ts renewal and expansion at 1120 20th Street, NW, taking 83,400 sf and expanding by about 7,000 sf. The District of Columbias office market has picked up in terms of transaction volume, but with more than 75% of gross leasing activity in the third quarter due to renewals, the areas resulting vacancy rate ticked downward by only 0.1 percentage points over the quarter to 10.2%. This is nearly two percentage points higher than the markets historical average vacancy rate of 8.6%. At $49.43 per square foot (psf), average asking rents have also remained flat. However, concession packages continue to reach record levels as landlords compete to secure long-term leases. While a few construction projects are underway across the city, speculative construction remains sparse in the District of Columbia. The only ground-breaking during the third quarter of 2013, was Perseus Realtys 1728 14th Street, NW. The 30,200-sf Class B office building in Uptown will deliver in early 2014 and is 23% preleased to a local architecture firm with lease negotiations for additional tenants underway. Only one building delivered in the third quarter: First Potomac Realtys renovation of 440 1st Street, NW. The 139,000-sf Class A office building in Capitol Hill is 14.3% preleased to trade association Associated Builders and Contractors. Five buildings currently under construction or renovation are expected to deliver by years end. These include Union Investments 600 13th Street, NW, a 256,700-sf office building undergoing a full renovation. The East End trophy building is expected to deliver in November and is 9% preleased to The Financial Services Roundtable. Lease negotiations with three additional tenants are nearing completion, which will bring the building to over 70% leased. While it remains to be seen what additional preleasing activity will occur in the last quarter of 2013, new and newly renovated office space in the District of Columbia has historically done extremely well. Leases in new space accounted for nearly 20% of non-renewal leasing activity in the third quarter, even though only 12% of the vacant inventory is new space. Forecast The District of Columbia boasts one of the healthiest labor markets in the country, and the private sector is well on its way in the recovery. However, until demand from the federal government returns, the office market is likely to remain flat- probably into 2015. Absorption is not expected to see any significant growth in the next 12 months as there are few large tenants with near-term lease expirations remaining in the market. Tenants 50,000 sf and larger are signing deals as early as three to four years ahead of lease expiration. Expect asking rents for commodity space to remain flat through 2014, while asking rents for trophy space continue to creep upward through the end of 2013 and even out in early 2014.


Economic Indicators
Q3 13
DC Metro Employment DC Metro Unemployment U.S. Unemployment U.S. CCI 2.50M 5.7% 7.4% 80.8

Q3 12
2.47M 5.7% 8.0% 65.0

Net Absorption
4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5
Square Feet (mil)







YTD 2013

Vacancy Rate
13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 2007 2008 2009 2010 2011 2012 2013

Historical Average

Cassidy Turley Office Market Snapshot

Washington, DC Third Quarter 2013

CBD East End West End/Georgetown Capitol Hill NoMa Southwest Capitol Riverfront/Southeast Uptown 252 198 59 44 37 36 11 97 734 38,845,180 38,522,051 6,019,052 4,642,579 9,636,850 13,907,238 3,736,758 6,489,940 121,799,648 415,473 287,633 37,054 17,167 16,134 33,241 32,343 41,754 880,799 4,480,561 3,686,950 460,526 311,459 927,450 1,298,450 642,938 560,849 12,369,183 11.5% 9.6% 7.7% 6.7% 9.6% 9.3% 17.2% 8.6% 10.2% 159,437 (53,208) 53,741 29,512 2,736 (153,835) 35,200 47,518 121,101 458,808 38,724 133,352 62,631 30,733 (205,942) 3,317 (30,847) 490,776 290,706 1,851,419 0 0 649,524 0 0 76,786 2,868,435 $50.48 $51.66 $45.98 $55.39 $46.94 $48.69 $44.39 $39.59 $49.43

Washington, DC Market TOTALS


Key Lease Transactions 3Q 13

PROPERTY 1501 K Street, NW 1441 L Street, NW 1800 G Street, NW 1120 20th Street, NW 1800 M Street, NW 1100 New York Avenue, NW 2600 Virginia Avenue, NW 641 S Street, NW 900 19th Street, NW 800 North Capitol Street, NW SF 289,000 176,100 86,100 83,400 57,500 48,000 35,600 32,900 31,600 30,700 TENANT Sidley Austin GSA- Bureau of Economic Analysis World Bank AT&T Corporation Berkeley Research Group Cohen Millstein National Trust for Historic Preservation WeWork World Bank GSA- Department of Heath and Human Services TRANSACTION TYPE Renewal Renewal Renewal Renewal/Expansion Relet Renewal Relet New Renewal Renewal SUBMARKET East End East End CBD CBD CBD East End West End/Georgetown Uptown CBD NoMa

Key Sales Transactions 3Q 13

PROPERTY 3000 & 3050 K Street, NW 701 13th Street, NW 2000 L Street, NW 700 14th Street, NW 1301 New York Avenue, NW SF 561,100 421,200 411,200 224,600 188,400 SELLER/BUYER MRP/Rockpoint / Principal Financial Group Clarion Partners / Jamestown Brookfield Property Group / Rockrose Tishman Speyer / Paramount Group, Inc. Boston Properties / Nakash Holdings PRICE $373,000,000 $307,500,000 $192,000,000 $183,000,000 $145,000,000 SUBMARKET West End/ Georgetown East End CBD East End East End

About Cassidy Turley

Cassidy Turley is a leading commercial real estate services provider with more than 3,800 professionals in more than 60 offices nationwide. With headquarters in Washington, DC, the company represents a wide range of clientsfrom small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $22 billion in 2012, manages approximately 400 million square feet on behalf of institutional, corporate and private clients and supports more than 23,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate servicesincluding capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit for more information about Cassidy Turley.

Bethany Bockmann
Research Analyst 2101 L Street, NW Suite 700 Washington, DC 20037 Tel: 202.463.2100 Fax: 202.223.2989
The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy. Copyright 2013 Cassidy Turley. All rights reserved.