Overall asking rents for trophy space has increased 6.6% over the past 12 months to $55.98 per sf, triple net. Direct vacancy rates in this top tier asset class is 1.4%, compared with the broader market's 7.7% vacancy rate.
Other positive metrics for trophy space cited in the report include a sublet vacancy--one of the first indicators of stress in the market--that fell from 1.1% to 0.9% over the past six month and a large number of pre-leases signed by law firms and corporate government affairs groups for projects under construction. At midyear, an additional three million sf of trophy product was under construction in 11 buildings scheduled to deliver between 2008 and 2012.
The trophy market's good performance, while limited to a very small subset of the DC market, still provides an indicator of what investors find appealing about the city, SVP Amy L. Bowser tells GlobeSt.com. More directly, this growth underlines DC's roles as a global gateway city. International companies that come here, she says, are looking for the best possible space. Furthermore, "stacked up against other capitol cities like London, for instance, DC real estate is a relative bargain." In price per sf, DC ranks far lower than most of the top world cities, she says.
The growing number of Gold and Platinum LEED certified buildings--which tend to be trophy buildings, but not always--is also fueling demand for premium space among firms that might not have considered it before, Tonya Ginter, director of Research & Marketing for GVA Advantis, tells GlobeSt.com. "Law firms will always pay top dollar for good space, but the introduction of green buildings into our office supply is giving some tenants a reason to pay more for top space."
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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.
