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The State of the DC Office Market: Too Many Vacancies!

10/01/2014
nathan edwards, nathan edwards cassidy turley, dc real estate, dc cre news

Preliminary numbers are in for the Washington DC Metro’s office market for the third quarter of 2014. In all three markets that comprise the region – The District of Columbia, Northern Virginia and Suburban Maryland, vacancy edged up, bringing us to 15.9% overall vacancy for the DC Metro region. This is up from 15.6% in the second quarter. 15.9% vacancy equates to 57 million square feet (msf) that remains empty. With this much vacant space – an all-time high, the advantage in lease negotiations will continue to be in the tenant’s court.

Net Absorption was negative in all three markets fueled by continuing downsizing among main office space users across the metro region – the federal government, law firms and government contractors. Year-to-date net absorption for the metro region stands at about negative 1.5 million square feet. With lackluster demand and a street fight to land the tenants that are in the market, most are penciling flat rents in most classes of office for the next two years. 

So, what’s working in the tough leasing environment? New and “newish” is setting itself apart from the multitude of office options that are out there. Properties that have undergone significant renovations are outperforming the market as a whole. Downtown office deliveries of newly renovated properties this quarter are between 60-70% preleased to top rent paying law firms.

 

Inventory

Total Vacant Space

Vacancy Rate

Q3 2014 Absorption

Year to Date Absorption

District of Columbia

122,941,139

14,095,178

11.5%

-255,763

-687,531

Northern VA

162,590,838

29,870,664

18.4%

-34,964

46,538

Suburban MD

72,976,854

13,144,369

18.0%

-299,688

-933,765

 

 

 

 

 

 

Total Metro DC

358,508,831

57,110,211

15.9%

-590,415

-1,574,758

 

 

 

 

 

 

Follow the link below and select “DC” from the dropdown menu for a breakdown of the third quarter 2014 leasing fundamentals by market.

http://www.cassidyturley.com/research/market-reports

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By: Nathan Edwards

Director of Research, Cassidy Turley - Washington, D.C.

nathan edwards, nathan edwards cassidy turley, cassidy turley, cassidy turley research, cassidy turley dc, cassidy turley washington dc

Email Nathan: Nathan.Edwards@cassidyturley.com

Follow Cassidy Turley on Twitter: @CassidyTurleyRE

More From Nathan Edwards:

Federal Job Losses Slowing in the DC Metro

The Jobs Situation in Metro DC – Two Steps Forward, One Step Back 

DC Metro’s Largest Leases in 2014

Multifamily market still going strong through the first half of 2014

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