MARKETBEAT

Washington, D.C.
Office Q4 2016

Washington, D.C. OFFICE

Economy
Despite headwinds from political uncertainty throughout the election year,

Economic Indicators

12-Month
Forecast

70,700 net new jobs were added to Metropolitan Washington, D.C. since

Q4 15

Q4 16

D.C. Metro Employment

3.20M

3.26M

jobs year-over-year. Overall, job growth remained most robust in the high-

D.C. Metro Unemployment

4.2%

3.9%

income, office-using sectors. Professional and Business Services led the

U.S. Unemployment

5.0%

4.8%

office-using sectors with 2,600 net job gains 1,400 of which were in legal

year-end 2015. Locally, the Washington, D.C. market added 11,660 net new

services followed by the government sector, which added 4,000 net new
jobs 2,740 of which were in the federal government.

Market Indicators (Overall, All Classes)

12-Month
Forecast

Market Overview

Q4 15

Q4 16

11.6%

12.1%

executions during the second half of 2016 helped the Washington, D.C.

Net Absorption (sf)

1.9M

786K

office market record 5.0 million square feet (MSF) of new leasing for the

Under Construction (sf)

2.4M

3.5M

year, 30.3% of which closed during the fourth quarter. MacFadden &

Average Asking Rent*

$51.18

$52.97

Vacancy

While new leasing declined 26.5% year-over-year, the surge in lease

Associates signed the largest lease of the fourth quarter, taking a total of
118,158 square feet (SF) at 555 12th Street, NW helping to chip away at
the full-building vacancy. It was also the second largest lease of 2016

*Rental rates reflect gross asking $psf/year

behind the General Services Administration's (GSA) renewal on behalf of the

Overall Net Absorption/Overall Asking Rent

U.S. Department of Justice (DOJ) at 1100 L Street, NW for 217,000 SF.

4-QTR TRAILING AVERAGE

12

$53.00

With new leasing activity hovering just below the 10-year average of 5.1

10

$52.00

MSF, vacancy rates rose slightly. Overall vacancy rates closed the fourth

$51.00

quarter of 2016 at 12.1%, a 50 basis point (BP) increase since fourth quarter

$50.00

of 2015. Landlords efforts to redevelop existing product has certainly helped

keep vacancy in check as buildings have come offline. However, with only a

$49.00

limited number of large, near-term lease expirations over the next three

$48.00

years that have yet to be spoken for, the net new available square footage

-2

$47.00

once the assets are redelivered to the market over the next 48 months will

-4

$46.00

continue to hold concession packages for Class A assets near current

2011

2012

2013

2014

Net Absorption, MSF

2015

Q4 16

levels.

Asking Rent, $ PSF

With still-peak concession rates averaging 12 months abatement and $100
tenant improvement allowance on new, long term Class A leases, overall

Overall Vacancy

asking rents have continued to hold, closing the fourth quarter of 2016 at

16%

$52.97 per square foot (PSF), a 3.5% increase since year-end 2015.

Outlook
14%

While the new presidential administration has yet to implement its proposals,
leasing activity is expected to pick up, particularly as political gridlock is
alleviated with alignment across the House, Senate, and White House. With
Historical Average = 12.6%

12%

strong job growth over the past two years, absorption is expected to remain
positive, even as tenants still seek out more efficient space utilization rates.
Overall, the Washington, D.C. market remains poised for tightening

10%
2011

2012

2013

2014

2015

Q4 16

fundamentals over the next 12 to 18 months.

cushmanwakefield.com

MARKETBEAT

Washington, D.C.
Office Q4 2016

INVENTORY
(SF)

SUBLET
VACANT
(SF)

DIRECT
VACANT
(SF)

OVERALL
VACANCY
RATE

CURRENT QTR
OVERALL NET
ABSORPTION
(SF)

YTD
OVERALL NET
ABSORPTION
(SF)

YTD
LEASING
ACTIVITY
(SF)

UNDER
CNSTR
(SF)

OVERALL
AVERAGE
ASKING RENT
(ALL CLASSES)*

OVERALL
AVERAGE
ASKING RENT
(CLASS A)*

Capitol Hill/NoMa

13,603,903

49,474

1,750,559

13.2%

-1,086

54,178

562,260

1,114,086

$54.49

$58.86

East End

37,671,390

313,368

4,584,053

13.0%

-441,549

-538,596

1,550,621

740,804

$57.67

$63.90

CBD

33,482,521

394,478

2,712,713

9.3%

573,359

946,073

1,715,943

1,227,659

$53.80

$63.89

5,097,432

44,444

512,592

10.9%

9,743

11,998

283,247

$45.63

$48.04

SUBMARKET

West End/Georgetown
Uptown

4,153,673

25,360

827,196

20.5%

-26,562

83,230

218,780

$42.20

$51.38

10,931,247

28,007

1,345,488

12.6%

67,145

76,721

447,261

211,787

$48.22

$50.76

4,074,326

20,687

546,077

13.9%

24,583

152,703

222,323

215,616

$41.48

$45.40

109,050,492

875,818

12,278,678

12.1%

205,633

786,310

5,000,435

3,509,952

$52.97

$60.75

INVENTORY
(SF)

SUBLET
VACANT
(SF)

DIRECT
VACANT
(SF)

OVERALL
VACANCY
RATE

CURRENT QTR
OVERALL NET
ABSORPTION
(SF)

YTD
OVERALL NET
ABSORPTION
(SF)

YTD
LEASING
ACTIVITY
(SF)

UNDER
CNSTR
(SF)

Class A

56,624,217

426,503

6,845,035

12.8%

64,858

689,218

2,893,169

3,509,952

$62.30

$60.75

Class B

30,369,200

254,933

3,648,526

12.9%

25,072

232,541

1,293,282

$50.84

$50.19

Class C

22,057,075

194,382

1,785,117

9.0%

115,703

-135,449

813,984

$42.69

$41.84

Southwest
Capitol Riverfront
WASHINGTON, D.C. TOTALS
*Rental rates reflect gross asking $psf/year

DIRECT
OVERALL
AVERAGE
AVERAGE
ASKING RENT* ASKING RENT*

Key Lease Transactions Q4 2016

PROPERTY
555

12th

SF

TENANT

TRANSACTION TYPE

SUBMARKET

Street, NW

118,158

MacFadden & Associates

Relocation

East End

1050 1st Street, NW

99,677

GSA Federal Election Commission

Relocation

Capitol Hill/NoMa

2300 N Street, NW

91,395

Aspen Institute

Relocation

West End/Georgetown

1 Massachusetts Avenue, NW

85,000

Amtrak

Relocation

Capitol Hill/NoMa

80 M Street, SE

68,673

WeWork

New Location

Capitol Riverfront

2001 M Street, NW

64,000

Weil, Gotshal & Manges LLP

Relocation

CBD

Key Sales Transactions Q4 2016

PROPERTY

SF

655 15th Street, NW

1030

15th

578,276

Street, NW

SELLER/BUYER

PRICE / $PSF

Blackstone Group JV Boston Properties/

Boston Properties JV NY Common Fund

$353,000,000 / $598.78

SUBMARKET
East End

328,978

Invesco Realty Advisors/ Unizo

$228,000,000 / $693.06

East End

1025 Thomas Jefferson Street, NW

295,000

The JBG Companies/ Alduwaliya

$141,800,000 / $449.26

West End/Georgetown

500 North Capitol Street, NW

229,112

Clark Enterprises JV Boston Properties /

Exan Capital

Cushman & Wakefield

2101 L Street, NW
Washington, DC 20037
cushmanwakefield.com

For more information, contact:

Nathan Edwards, Regional Director
Tel: +1 202 463 2100
nathan.edwards@cushwake.com

$232,000,000 / $1,002.86

Capitol Hill/NoMa

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Copyright 2016 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple
sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or
representations as to its accuracy.