District of Columbia Office Market
- The District of Columbia’s vacancy rate rose 50 basis points over the quarter to end 2023 at 20.1%. However, 2023 saw only one office delivery totaling 178,324 square feet in the District, a market that has averaged 1.8 million square feet of annual deliveries over the past 20 years. A slowdown in office deliveries and the lack of new speculative office construction will be advantageous in helping to balance supply with waning demand.
- Asking rental rates have been decreasing year over year since 2021. The District of Columbia has not experienced sustained annual losses in asking rents since the Global Financial Crisis, but even then, it took two years for rates to noticeably drop in 2011. Continued limited demand—and in some cases, a lack of capital for concessions—has placed downward pressure on asking rents in the District.
- Both Class A and Class B rents continue to exhibit modest softening, however, after dipping during 2023, both have recovered to be on par with or slightly higher than a year ago. Trophy and Class A space continue to outperform, while Class B and Class C rates will continue to be flat or decline as user demand also drops.
- The largest fourth-quarter transactions were lease renewals, however, a handful of larger new leases were signed during the quarter, signaling tenants’ confidence in making long-term real estate decisions while also weighing future space needs and hybrid work models.