With the third largest office inventory in the country, DC offers one of the best markets for investors, developers, corporate offices and tenants. With net absorption remaining strong, lease rates and purchase prices continue to rise, and low vacancy rates, it is no wonder that investors continue to rank the District as the #1 office investment market nationally and internationally.

Washington DC experienced healthy conditions during 2007, as the office market continued to expand at a modest pace.  Although vacancy is up over the past year, the metro area ranked 5th in lowest overall vacancy among large metros at year-end.  Absorption is below average, as light leasing activity and tenant move-outs impacted absorption this year.  Given these conditions, rents increased by only 2.2% over the past 12 months.  The pipeline expanded, but that is due in part to renovations as Class B property owners attempt to compete with Class A space.

Despite softening conditions, the metro area remains one of the top performing markets in the nation. Development in the District of Columbia continues at a robust and unprecedented pace. The development dynamic of the District has continued to expand to include over 970 projects with a value of over $51 billion. These development projects offer an insight into the strength and diversity of our economy, as well as to its overall performance and health.

Washington DC Commercial Leasing Report for First Quarter of 2008

Washington DC Commercial Leasing Report for Forth Quarter of 2007

Washington DC Commercial Leasing Report for Third Quarter of 2007

Washington DC Commercial Leasing Report for Second Quarter of 2007

Office Buildings for lease in Washington DC

Rents increased through mid 2007, making it a good time for landlords and a challenging time for tenants looking for new space in Class "A" buildings in the District. Average rents in the District increased to $44.97 per square foot from $42.74 per square foot, just twelve months before. But, despite rising rates, the government continues to expand their office space and law firms are making no qualms about paying close to $70 per square foot for new office space.

3rd quarter 2007, the average direct asking rent in Washington, DC was $54.15 psf on a full service basis, up from $52.64 in the 2nd quarter and $48.67 one year before. Rents  increased dramatically in the Class A sector due to tightening vacancy and an appreciation in the level of investment sales. Trophy buildings are commanding rents between $65 and $75 psf. Overall asking rates are highest in the East End where office space averages $57.56  psf;  however, Class A rates are the highest in the Central Business District (CBD), averaging $62.22 psf. The biggest rent spike during the 3rd quarter occurred in the Capitol Hill submarket. Asking rates average $53.48 psf, a 9.4% increase since the 2nd quarter.

Total net absorption for the  second quarter was 404,112 sf, down from 991,996 sf in the second period. This downward trend can mainly be attributed to tenants vacating large blocks of space in the West End and Uptown submarkets. Despite the decrease in overall net absorption, the CBD and East End submarkets continued to post healthy levels of net absorption, ending the 3rd quarter at 224,565 sf and 434,144 sf, respectively.

3rd quarter 2007 the overall vacancy rate in Washington, DC was 5.7%, down 20 basis points since the 2nd quarter. Vacancy rates dropped across the board in every submarket except for the West End and Southwest. The West End's vacancy rate increased almost five percentage points to 10.9% due to the Bureau of National Affairs' departure to Crystal City, and Southwest's vacancy rate increased 100 basis points to 10.3% due to the delivery of Clark Enterprises' 425 3rd Street SW, which added an additional 232,000 sf of vacant space to the market. The CBD had the lowest vacancy rate, dropping 60 basis points to 3.3%. The Class A vacancy rate climbed 20 basis points to end the quarter at 6.7%,

while the Class B vacancy rate continued to decrease, dropping from 5.2% to 4.5% during the 3rd quarter as tenants priced out of premium space sought lower cost alternatives. While tenant demand will continue to center around the expansion of existing tenants, the District has seen a large increase in new leases signed over the last six months as well. It must also be noted that with the increased diversity among Washington, DC tenants, the demand for Class "B" space has picked up over the last year. Class "B" vacancy ended the second quarter at 5.7 percent as compared to the District's, Class "A" vacancy of 6.8 percent

Overall Office leases in Washington DC, Year-End 2007

Net absorption: 5.4 million SF, compared to 6.8 million SF in 2006

Sublease space: Increased by 472,000 SF. Sublease space represents 1.1% of the standing inventory

Overall vacancy rate: 9.1%, up from 8.5% one year ago

Direct vacancy rate: 8.0%, up from 7.5% one year ago

Space under construction: 20.6 million SF, up from 16.8 million SF a year ago

Rents: Increased 2.2%