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MARKETBEAT

Washington, D.C.
Office Q1 2017

Washington, D.C. OFFICE Economy


Economic Indicators The Washington, DC metropolitan region continued its robust
12-Month
Q1 16 Q1 17 economic expansion in the first quarter of 2017, adding a total of
Forecast
26,800 net new nonfarm jobs to payrolls in January and February.
D.C. Metro Employment 3.2M 3.3M
Despite the strong regional environment, the District of Columbia
D.C. Metro Unemployment 4.1% 3.8% proper (the District) contracted slightly. The District, shed 2,400 jobs
U.S. Unemployment 4.9% 4.8%
in the first two months of the year, with modest gains in Professional
and Business Services and Leisure and Hospitality offset by 3,500
losses in the Education and Healthcare sector. The unemployment
rate for the District ended February, 2017 at 5.7%.
Market Indicators (Overall, All Classes)
Market Overview
12-Month
Q1 16 Q1 17
Forecast
The Downtown Washington, DC office market hit a lull during the
Vacancy 11.8% 12.3%
first quarter of 2017. Net absorption totaled 43,356 square feet (sf)
Net Absorption (sf) (3K) 43K and vacancy ticked up 50 basis points to 12.3% year-over year, due
Under Construction (sf) 3.0M 4.8M to a slowdown in leasing activity and large scale moves occurred.
Venable was the largest mover in the market as they took
Average Asking Rent* $51.74 $53.21
occupancy at 600 Massachusetts Avenue NW, moving from 575 7th
Street NW near the Verizon Center. The move resulted in a marginal
*Rental rates reflect gross asking $psf/year
downsize for Venable in large part due to the expansions that they
had taken at 600 Mass before moving in. Other market movers were
Overall Net Absorption/Overall Asking Rent the DC Government moving out of 609 H Street NE, Bingham
4-QTR TRAILING AVERAGE McCutchen moving out of 2020 K Street NW and NPS terminating
12 $54.00 the top two floors at 1201 Eye Street NW. The delivery of the newly
renovated 1333 H Street NW drove most of the positive absorption
10 $53.00
for the quarter as the building was over 75% leased. In the Capitol
8 $52.00 Riverfront submarket, 80 M Street SE also experienced significant
6 $51.00 activity in the small tenant space as five deals closed, the largest
4 $50.00 being DC Water for nearly 11,000 SF.
2 $49.00
0 $48.00
Outlook
-2 $47.00 Class B space continues to be a hot commodity in the Core
-4 $46.00 Submarket. Developers continue to pursue the high end of the
2011 2012 2013 2014 2015 2016 2017 market by redeveloping obsolete product. As these properties are
Net Absorption, MSF Asking Rent, $ PSF removed from inventory, limited choices remain in the Class B
space. The Class B market is currently at 10.0% vacancy in the
CBD and East End, and continues to tighten. As pricing in Class A
and Trophy continues to rise, look out for near term rental growth in
Overall Vacancy Class B properties in the Core markets, particularly as tenants who
16% are displaced due to the next wave of redevelopment continue to
compete for space.

Additionally, the presidential election coupled with the alignment of


14%
the House and Senate has not created any more certainty through
the end of the first quarter. Many tenants have continued to use a
wait-and-see approach as many policies the President promised to
12% Historical Average = 12.6% act on are still up in the air. As more appointees are approved and
policy becomes clearer, expect leasing velocity in the lobbying and
government affairs space to accelerate.

10%
2011 2012 2013 2014 2015 2016 2017
cushmanwakefield.com
MARKETBEAT

Washington, D.C.
Office Q1 2017

CURRENT QTR YTD YTD OVERALL OVERALL


SUBLET DIRECT OVERALL UNDER
INVENTORY OVERALL NET OVERALL NET LEASING AVERAGE AVERAGE
SUBMARKET VACANT VACANT VACANCY CNSTR
(SF) ABSORPTION ABSORPTION ACTIVITY ASKING RENT ASKING RENT
(SF) (SF) RATE (SF)
(SF) (SF) (SF) (ALL CLASSES)* (CLASS A)*

Capitol Hill/NoMa 13,639,903 78,542 1,797,791 13.8% (76,300) (76,300) 522,891 1,585,174 $54.31 $60.09

East End 37,563,231 412,387 4,483,112 13.0% 197,970 197,970 397,152 1,011,394 $57.93 $62.73

CBD 33,010,557 389,464 2,876,576 9.9% (150,088) (150,088) 598,080 1,556,479 $54.93 $64.87

West End/Georgetown 5,097,432 48,571 480,104 10.4% 28,361 28,361 44,444 0 $46.17 $49.71

Uptown 4,153,673 31,609 806,953 20.2% 13,994 13,994 18,522 0 $41.99 $46.00

Southwest 10,931,247 37,695 1,441,011 13.5% (38,180) (38,180) 216,559 457,787 $45.95 $45.02

Capitol Riverfront 4,074,326 24,018 475,147 12.3% 67,599 67,599 28,867 215,616 $40.49 $43.61

WASHINGTON, D.C. TOTALS 108,470,369 1,022,286 12,360,694 12.3% 43,356 43,356 1,826,515 4,826,450 $53.21 $61.73

*Rental rates reflect gross asking $psf/year

CURRENT QTR YTD YTD


SUBLET DIRECT OVERALL UNDER DIRECT OVERALL
INVENTORY OVERALL NET OVERALL NET LEASING
VACANT VACANT VACANCY CNSTR AVERAGE AVERAGE
(SF) ABSORPTION ABSORPTION ACTIVITY
(SF) (SF) RATE (SF) ASKING RENT* ASKING RENT*
(SF) (SF) (SF)

Class A 56,991,117 608,915 6,872,335 13.1% 129,639 129,639 1,490,566 4,573,468 $64.43 $61.73

Class B 29,772,177 208,546 3,609,094 12.8% 83,814 83,814 218,964 0 $50.81 $50.23

Class C 21,707,075 204,825 1,879,265 9.6% (170,097) (170,097) 116,985 0 $42.67 $41.64

Key Lease Transactions Q1 2017


PROPERTY SF TENANT TRANSACTION TYPE SUBMARKET

45 L Street NE 473,000 Federal Communications Commission Relocation Capitol Hill/NoMa


GSA - U.S. Citizenship & Immigration
20 Massachusetts Avenue NW 260,992 Renewal Capitol Hill/NoMa
Services
DC Government Public Schools & Dept
1200 1st Street NE 200,000 Renewal Capitol Hill/NoMa
of Environment
2001 K Street NW - Addition 189,268 Akin Gump Relocation CBD

2050 M Street NW 97,000 Paul Hastings Relocation CBD

2100 Pennsylvania Avenue NW 88,850 Sughure, Mion PLLC Renewal CBD

Key Sales Transactions Q1 2017


PROPERTY SF SELLER/BUYER PRICE / $PSF SUBMARKET
Beacon Capital Partners / GIC JV
Lafayette Center 789,235 $404,000,000 / $512 CBD
Korean Investment Corp
575 7th Street NW 424,808 Beacon Capital Partners / GIC $266,500,000 / $627 East End

1875 K Street NW 187,624 Shorenstein Properties / Carr Properties $150,000,000 / $799 CBD

425 3rd Street NW 221,086 Clark Enterprises / Unizo Holdings $148,000,000 / $669 Southwest

Cushman & Wakefield For more information, contact: About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live.
2101 L Street, NW Nathan Edwards, Regional Director Our 43,000 employees in more than 60 countries help investors and occupiers optimize the value of their real estate by combining
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among the largest commercial real estate services firms with revenue of $5 billion across core services of agency leasing, asset
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Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit
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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.