D.C.'s Office Market Sees Stable Leasing Amid Trophy Space Scarcity

Washington D.C.'s office market remained relatively stable in Q3, but the divide between top-tier properties and the broader market grew. The market saw approximately 1.8 million square feet of leasing activity during the quarter, which is roughly in line with its five-year average quarterly total.

This leasing figure, however, was down from the 2 million square feet leased in Q2, according to Savills. Availability rates ticked down to 24%, while trophy space availability remained below 10%. The average Class A asking rent increased by 2 pennies since Q2 to $62.31 per square foot per year.

The scarcity of premier office space is driving tenants, mostly law firms and government departments, to make decisions years in advance of lease expirations. This trend has also encouraged landlords to reposition their properties. Sheppard secured the quarter's largest law firm deal by relocating to 107,227 square feet at 2033 K Street NW, which is set for an extensive redevelopment.

Google posted the quarter's largest lease deal with a 210,000-square-foot consolidation move to 500 North Capitol Street NW. The local D.C. government also secured significant deals, renewing for 164,110 square feet at 1050 First Street NE and 74,924 square feet at 645 H Street NE.

Despite the relatively stable market, federal leasing remains a weak spot. Savills reported that General Services Administration leasing volume is on pace to decline from last year due to fewer transactions above 100,000 square feet in the first three quarters.