WASHINGTON, DC-The DC area's commercial real estate community is waiting for last minute number crunching to complete to hear the verdict for the year—did lease absorption make any progress? did investment sales exceed 2012's numbers? One number ready to be released comes from Jones Lang LaSalle and it appears to bode well for 2014: the metro DC area's office pipeline is entering the year 58.5% preleased. That is significantly above the long-term average of 47.3%. Of course, there's currently just 4.4 million square feet of office space under construction in the DC area, which well below the long-term average of 11.4 million square feet. There are a number of nuances to tease out from these stats but the good news, for landlords at least, is that supply is moving to better align with demand, JLL's director of research, Scott Homa tells GlobeSt.com.

"That will balance fundamentals and slowly erode that sense of leverage that tenants believe they have," he says.

A closer look at these figures, though, shows a metro area that is still struggling to regain some sense of balance. Quality space, for example, remains very limited and very competitive while second tier outer markets continue to struggle. "We are seeing vacancy rates high in less desirable submarkets and buildings even as new construction is at the highest level of pre-leasing we have ever seen," Homa says.

"So developers are being cautious and deliberate in the timing of their new developments."

This trend can be seen in the preleasing figures. Within Downtown Washington, DC, the 1.5 million square feet under construction is 79.2% preleased.

One takeaway from these numbers is that large tenants in the market must start evaluating space options early or risk being confined to less-desirable second-generation space, JLL concludes.

Instant Insights /

DC's Construction Pipeline is 59% Leased

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