DC's Office Supply-Demand Equilibrium Is Seriously Out of Whack

JLL’s Scott Homa

WASHINGTON, DC-The area is in for increasing office vacancy rates within the next eighteen months or so, thanks to a large number of spec offices under development and no sign of users interested in taking up large blocks of space as law firms and the US government once did, according to an analysis by JLL. Unfortunately, DC’s spec activity is particularly ill-timed given where the city is in its lease expiration cycle over the next 24 to 36 months. The bottom line is that “by 2018, there could realistically be a 3% to 5% increase in vacancy rates,” JLL Market Research Director Scott Homa told GlobeSt.com.

Before we dive into the numbers, it is important to note that there is a sharp contrast between what is happening in the District and what is happening metrowide. Northern Virginia’s pipeline has increased as well, but as Homa noted, “the vast majority of that construction is build to suit.”

DC’s pipeline, by contrast, is dominated by spec construction, barring a few prominent build to suit projects such as Fannie Mae’s headquarters.