Q2 2012 District of Columbia, District of Columbia Office Submarket Trends

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Q2 2012 District of Columbia, District of Columbia Office Submarket Trends

Since the Reis inventory excludes government and, owner-occupied buildings, it excludes the Mall. The largest submarkets, with nearly 75% of the space, are located north of the Mall and either west (Downtown) or east (East End) of the White House. As the city recovers from its dark days as the nation’s murder capital, however, the real estate action is spreading to adjacent submarkets, in particular the Capitol Hill area to the east.

East End

  • The 34.5-million-square-foot East End submarket has a second quarter 2012 vacancy rate of 8.3%, and an average asking rent of $52.05 psf, the highest among seven submarkets according to Reis.
  • The vacancy rate increased 30 basis points over the quarter on 107,000 square feet of negative net absorption. The average asking rent decreased 0.1% over the quarter and the average effective rent decreased 0.2% to $43.56 psf. Year-over-year gains are reported at 1.0% and 1.5%, respectively.
  • Cushman & Wakefield reports an overall vacancy rate of 10.8% for 36.2 million square feet in the East End. This source reports an overall weighted average rent of $54.32 psf, and a direct weighted Class A average rent of $63.80 psf
  • For the East End, Jones Lang LaSalle reports year-to-date total net absorption at negative 288,831 square feet. Total vacancy is reported at 9.9%, and the average asking rent is given at $53.82 psf.
  • For its East End/Convention Center submarket, Studley, Inc. reports an availability rate of 11.9% and an asking rent of $49.81 psf.

Downtown

  • For the 29.2-million-square-foot Downtown submarket, Reis reports a second quarter vacancy rate of 8.2%, with an average asking rent of $48.95 psf.
  • The Center for Strategic and International Studies is under construction in this submarket for completion in 2013.
  • The vacancy rate is down 30 basis points from the prior quarter on 63,000 square feet of positive net absorption. The average asking rent was up 0.3% for the quarter, while the average effective was up 0.2% to $42.28 psf. The asking and effective averages are up 0.8% and 1.1% year-over-year, while the vacancy rate is down 40 basis points.
  • Cushman & Wakefield reports a Central Business District (CBD) overall vacancy rate of 13.6%. Year-to-date overall net absorption is negative 272,876 square feet. “In the CBD, Class A asking rents increased by $2.35 psf since last quarter, primarily due to a large block of space available for lease at the newly completed 1000 Connecticut Avenue NW.,” this source reports. The overall weighted average rent is given as $50.62 psf, while the direct Class A weighted average is $62.83 psf.
  • Jones Lang LaSalle gives a total CBD vacancy rate of 11.9% and an average asking rent of $52.80 psf. Studley, Inc. gives a CBD availability rate of 13.9% and an asking rent of $49.08 psf. This source notes that “Class A availability grew at a greater pace than the overall market” with “pronounced jumps” noted in the downtown markets, including the Central Business District.

Capitol Hill

  • In the 17.7-million-square-foot Capitol Hill submarket, Reis reports a second quarter vacancy rate of 12.2%, and an average asking rent of $50.06 psf.
  • Net absorption was negative in the second quarter, as it was in the first quarter. The quarter’s total was 49,000 square feet, bringing the year-to-date total to negative 91,000 square feet. Vacancy increased 30 basis points over the quarter and 200 basis points year-over-year. The average asking rent and the average effective rent increased 0.3% and 0.2%, respectively, over the quarter, the latter to $41.72 psf. The year-over-year gains are 1.5% and 2.0%, respectively.
  • For 12.1 million square feet in Capitol Hill/North of Massachusetts Avenue (NoMA) submarket, Cushman & Wakefield reports a second quarter overall vacancy rate of 9.1%, an overall weighted average asking rent of $46.09 psf, and a direct weighted Class A rent of $55.71 psf.
  • “Constitution Square Three has yet to secure a lead tenant. The 400,000-square-foot spec property is scheduled to deliver at the end of next year in the tightest submarket in the District,” according to Cushman & Wakefield, referring to NoMa.
  • Jones Lang LaSalle reports a total vacancy rate of 5.8% for Capitol Hill, and an average asking rent of $58.90 psf. This source reports that the State Services Organization at 400-444 N. Capital Street renewed a lease for 237,848 square feet in the Capitol Hill submarket. Studley, Inc. reports an availability rate of 13.7% and an asking rent of $52.00 psf.

Southwest

  • Reis reports a vacancy rate of 11.2%, and an average asking rent of $50.75 psf for the 10-million-square-foot Southwest submarket.
  • The vacancy rate fell 20 basis points during the second quarter, while the average asking rent increased 0.2% and the average effective rent increased 0.2% to $44.13 psf. The asking and effective averages are up 0.6% and 0.9% from a year earlier, and the vacancy rate is up 40 basis points.
  • Cushman & Wakefield reports a 16.4% direct vacancy rate in the Southwest submarket, and an overall weighted average asking rent of $52.83 psf. The direct weighted Class A average is given as $54.69 psf.
  • For the Southwest, Jones Lang LaSalle reports total vacancy at 12.6% and an average asking rent of $49.16 psf.

Uptown

  • In the 5.5-million-square-foot Uptown submarket, comprising most of the prosperous Northwest section of Washington, D.C., Reis reports a vacancy rate of 7.5%, up 20 basis points for the quarter and up 80 basis points year-over-year. Net absorption was negative 13,000 square feet in the second quarter after 35,000 square feet of negative net absorption in the first quarter.
  • The average asking rent increased 0.1% for the quarter and 1.6% year-over-year, respectively, to finish at $37.50 psf. The average effective rent increased 0.1% and 1.7% to $30.83 psf.
  • Cushman & Wakefield reports a 12.0% overall vacancy rate, and an overall weighted average rental rate of $37.73 psf for 3.5 million square feet Uptown. Studley, Inc. reports an Uptown availability rate of 9.9% and an average asking rent of $36.02 psf.
  • Jones Lang LaSalle reports a total vacancy rate of 10.7% for Uptown, and an average asking rent of $38.93 psf.