Even while the majority of the recent news in the DC Metro’s office market revolves around how lackluster the leasing market is, we haven’t seen this translate into a surge of buildings being transferred to special servicing. Currently, according to Trepp, there are 39 office buildings in the DC Metro region in workout mode, accounting for just over 5 million square feet - just 1.4% of total inventory.
That’s not to say that there aren’t some pockets of concentrated distress. Of the 39 office buildings on the market, 30% of them are in Northern Virginia’s Chantilly market, while another 13% are in the Rockville area of Suburban Maryland. The culprit you ask? Well, it’s no coincidence that both Rockville and Chantilly boast a large presence among federal contractors. The contractor leases that have rolled in the distressed assets account for approximately 1.3 msf of the total 5 msf in special servicing – 25%. With procurement dollars and awards for federal contracts down across the board, distress in this industry sector has made its way into the office market, which remains one of the key targets for cutting overhead costs amid an increasingly competitive contracting landscape.
By: Nathan Edwards
Director of Research, Cassidy Turley - Washington, D.C.
Email Nathan: Nathan.Edwards@cassidyturley.com
Follow Cassidy Turley on Twitter: @CassidyTurleyRE
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