WASHINGTON, DC-Washington DC and the surround areas have been beset not only by a diminished federal government but also by companies in general pushing to rightsize their space. That latter trend, however, may be peaking, with a tipping point in sight, Jones Lang LaSalle speculates in its Q4 report on the market.

Sublease space in the metro DC region fell to a 13-year low of 3.7 million square feet during the fourth quarter, and the availability of new, efficient space continued to decline due to limited speculative construction activity, it said. Meanwhile, growth of small and midsize tenants helped drive modest occupancy gains throughout Washington, DC, Northern Virginia and Suburban Maryland during the fourth quarter. "While most tenants still found ways to improve space efficiency as part of new leases, the ability of tenants to continue this trend in the future will be limited by a skewing of available inventory from new, modern buildings to older, less efficient product."

Indeed, a separate JLL data point finds that the metro DC area's office pipeline is entering the year 58.5% preleased, which significantly above the long-term average of 47.3%. This among other reasons leads JLL Market Research director Scott Homa to conclude that supply is moving to better align with demand—and a more balanced tenant-landlord dynamic is on the horizon.