The numbers tell the story. The region's direct vacancy rate, currently at 8.2%, is down all around, with the District reporting a low 5% vacancy. The figure in suburban Maryland is 10.3% and in Northern Virginia vacancies are at 9.7%. All three areas of the region have shown a marked improvement over the year-end 2003 numbers of 5.9%, 11.2% and 12.7%, respectively. Additionally, positive net absorption for the year totaled about 7.4 million sf; deliveries totaled 6.9 million sf. With demand on the upswing, the region's average class A office leasing rate increased from $27.50 in the fourth quarter of 2003 to $29.25 in the fourth quarter of 2004; class B numbers remained relatively stable, declining slightly from $26.75 to $26.50.

An increasingly strong job market appears to be the backbone of the region's office market success. The federal government has continued to take on office space as it enhances homeland security and defense efforts, leaving the region in a better position than most other areas across the country during the last few years national economic strife. And private sector demand for space is picking up, as well.

The consistently hot metropolitan office market has continued to catch the eye of investors, both domestic and international; however, the property pickings are slim and the price tags are high. "Investor interest and capital flow into the Washington region continues to exceed the supply of buying opportunities, driving prices higher and cap rates even lower," Advantis concludes in the report. Still, the competition to buy in this market continues at a feverish pace.