Washington D.C.’s office market is experiencing significant growth thanks to the activity from the government sector.
In the second quarter, leasing activity totaled 2.1 million square feet, according to a report from Savills. That’s not only up from the 1.7 million figure from the first three months of the year – but from the 1.4 million year-over-year number as well.
The top three leasing deals came from the government industry. This includes the Federal Housing Finance Agency, D.C. Dept. of General Services, and the Commodity Futures Trading Commission. In total, they racked up 857,800 in combined square feet.
The three government agencies were followed by The Washington Design Center, in the retail segment, and International Food Policy Research Institute. Additionally, the government sector struck two more leasing deals in the top 10. Those involved two separate Federal Bureau of Investigation properties, located in the Southwest submarket.
Availability shot up to an all-time high of 23.3 percent in the second quarter compared to 22.1 percent year-over-year. Sublease space was down marginally from 3.4 million square feet in the same period a year ago, to 3.1 million square feet in the June 2024 quarter.
Average asking rents inched higher to $54.81, a small 0.1 percent boost year-over-year. Class A’s increased from $58 to $58.47. This is because landlords preferred to give “large concession packages to keep face rents high,” Savills wrote. Moreover, the firm anticipates this trend continuing in the future.
Savills also provided more specifics on the general outlook for Washington D.C. It sees availability levels staying “elevated” for the rest of 2024 and going into next year as sublease and commodity space remains on the market.
Savills expects the majority of companies to be “cost-conscious” for office space. Another thing is companies with obsolete buildings could weigh office to residential conversions, according to the firm. Other property owners could raise rents.