WASHINGON, DC-Sequestration dragged on the Washington DC commercial real estate industry for the third quarter of 2013, a situation that only worsened with the ongoing uncertainty of the federal government's budget and threats of a government shutdown. CBRE, in advance of its quarterly report, notes that office leasing velocity, of 5.4 million square feet, throughout the entire region was one-third less than the third-quarter average of the past three years.

In many ways it is the same story but a different player, Jeff Kottmeier, director of Research for CBRE's Mid-Atlantic Region tells GlobeSt.com. "Last year BRAC was acting as a drag on the local market. This year we are not seeing as much impact from BRAC but other initiatives such as sequestration are taking its place."

According to CBRE's preliminary numbers, area-wide vacancy rates rose a 0.1 percentage point to 14.5%. While the region added a robust 48,900 jobs over the past 12 months, which is well above the 25-year historical average, most of that growth was in non-office employment. In addition, a focus on workplace efficiencies and fewer square feet per office worker also translated into lower net demand for office space.

CBRE also reports that:

• Vacancy climbed to 10.5%, up 0.3 percentage point from the second quarter for the District. Renewals accounted for 54% of all transactions this quarter, a substantial increase from 37% at the same time last year. The largest renewal was by Sidley & Austin for 289,000 square feet of trophy office space.

• In the Northern Virginia office market, the vacancy rate is up 0.1 percentage point from the second quarter, to 16.2%. Buildings accessible to the new Silver Line Metro stations in Tysons Corner are seeing increased tour activity and are anticipating higher rents, with largest lease transaction a renewal of 343,000 square feet by the U.S. Department of State Bureau of Diplomatic Security in Rosslyn.

• In Suburban Maryland, the preliminary vacancy rate is 16.6%, down slightly (0.3 percentage point) from the last quarter. As in the rest of the metropolitan DC area, the top lease transaction was a renewal--Bechtel Power Corp.'s retention of 123,000 square feet of space. Early indicators suggest the vacancy rate in Montgomery Country is likely to rise through 2014-15 due to GSA consolidations.