Trophy office buildings in Washington, DC have consistently been the market’s top performers. With the exception of a few blips coming out of recessions, DC trophy vacancy has remained below that of the broader market. At the end of 2014, trophy direct vacancy averaged 8.1% compared with 11.2% in DC overall. Law firms are a key sector in DC’s trophy office market. Since 2008, approximately 84% of leases signed by the region’s largest law firms were either renewing in or relocating to trophy office buildings. With strong demand from law firms, trophy office space has the ability to command top asking rents. At the end of 2014, trophy asking rents averaged $62.93 psf, a 16% premium over Class A rents.
Starting around 2008 in the wake of the Great Recession, many of the largest law firms began to shrink their footprints and become more efficient. While these consolidations had a significant effect on DC’s overall net absorption, trophy space has continued to be the clear winner as law firms have gravitated to new top-quality construction. Since the beginning of 2011, there has been 1.6 MSF of positive absorption in Trophy buildings, while only 77,000 SF has been absorbed in the rest of the market.
Looking forward, the DC trophy office market is expected to continue to outperform the broader market. National economic fundamentals are headed in the right direction and an increase in demand for legal services will surely follow. With approximately 75% of the largest DC law firms having completed transactions over the past 7 years, it appears the glut of consolidations are behind us. We expect the trend of law firms renewing in and moving to trophy buildings to continue and to see positive net absorption in the trophy market moving forward.
By: Nathan Edwards
Director of Research, DTZ - Washington, D.C.
Email Nathan: Nathan.Edwards@dtz.com
Contributor: Bethany Schneider, Research Analyst, DTZ
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