A typical year in the Washington, D.C. Metro region will see 7.5 msf of office space delivered. This phenomenal growth was spurred in the last decade by the tech boom coupled with a massive expansion of the federal government after 9-11. Recent merger and acquisition activity in the region has most people betting that future growth will be in Cybersecurity, Healthcare IT and cloud computing-related fields. Today, the D.C. metro region as a whole boasts 6.7 msf of office development currently underway with 3.6 msf set to deliver in 2014. Until these growth sectors really take off, yearly deliveries in the near term will hover around 4 msf.
With new high quality office product continuing to attract an outsized portion of the office demand in the Washington, D.C. metropolitan region, it is a bit surprising that there is not more development underway. Since 2007, over 17 million square feet (msf) of Class A/”first generation” office space has been absorbed, while 7 msf of second generation space has been put back on the market. The current environment is characterized by lackluster demand, stalled office employment growth, record high vacancy, and tenants across various industry sectors continuing to reduce their real estate footprint. These trends have impacted what would otherwise be a robust development cycle. The good news is that in the past three months, there are signs that job growth is picking back up – including growth in the main driver of private sector office demand in the region – Professional and Business Services employment. With that in mind, breaking ground today by no means guarantees success but many developers are being rewarded.
Stay tuned for a full multi-sector, market by market development overview from Cassidy Turley available on August, 21st at: http://www.cassidyturley.com/research
By: Nathan Edwards
Director of Research, Cassidy Turley - Washington, D.C.
Email Nathan: Nathan.Edwards@cassidyturley.com
Contributor: CJ Hardy, Research Analyst, Cassidy Turley
Follow Cassidy Turley on Twitter: @CassidyTurleyRE