"What is generally 800,000 sf per quarter in renewals was 1.2 million sf in Q1," Scott Homa, research manager at JLL, tells GlobeSt.com.
The reasons are two-fold, he explains: "the rise in commodity prices means that the cost of building out from shell has increased since 2003 by 52%. Also, with the overall economy slowing, companies have become more conservative in estimating their space needs."
Tonya Ginter, director of Research & Marketing for GVA Advantis, agrees that fewer new deals are being inked in the District. "People are wary of signing new space in this environment," she tells GlobeSt.com. In face, she adds, "we are starting to see more tenants put subleted space on the market – they are downsizing."
Trophy space is the exception, with firms that need such high-end buildings willing to not only pay top dollar but move across the city to get it. For instance, word on the street is that a trophy building under development at 300 New Jersey Ave., will ask be asking for $100 per sf, according to John Sikaitis, JLL vice president and director of research, in an earlier interview with GlobeSt.com. This would be among the highest in the District.
The majority of lease deals, though, have been renewals--or at best, renewals and expansions--as JLL quantifies. Recent examples include a Department of Defense 235,983-sf renewal at 400 Army Navy Dr. in Arlington, VA., and SmithBucklin's decision to renew and expand its CBD office at 2025 M St.
These trends will continue for at least the rest of the year, Homa says, especially among government tenants. "This is a lame duck administration and agencies do not have as much procurement dollars."
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
