WASHINGTON, DC-Jones Lang LaSalle notes that trophy properties in the DC area reached a milestone in 2010: their sales topped $900 million, the highest level ever for the city. The area shows every sign of repeating this record with the sale of Market Square, a 679,710-square-foot complex at 701 and 801 Pennsylvania Ave., which just traded for $615 million, or $904 per square foot. 

Also, the number of off-market transactions increased dramatically in 2010, accounting for more than one-third of all sales volume for the year. What can the market glean from these data points, which are part of the company’s North American Skyline Review. For starters, because supply dynamics are stabilizing--especially among trophy properties--landlords see little need to be as generous as they have been in the past two years with tenant improvement allowances.

The Washington, DC trophy market equals 12.4 million square feet of space in 38 buildings, with just over one million square feet currently vacant. Perhaps more tellingly, the three trophy projects under construction--1000 Connecticut Ave., 2200 Pennsylvania Ave. and 800 17th St.--are already nearing 35% pre-leased. Rental rates for these buildings are approximately $75 on a full-service basis, JLL says.

Another driver for this space in the DC market is that companies like to use it as part of their marketing with the federal government, says JLL’s research manager, Scott Homa. They “use them as state-of-the-art examples of their industries…to showcase the wide array of technology, goods and services they have to offer.”