WASHINGTON, DC—In the last week both JLL and Newmark Grubb Knight Frank released separate reports on leasing trends in the DC area. At first glance they almost seem to be talking about two different cities. NGKF focused on the bifurcation of office market, which has become far more profound in a surprisingly short period of time. This gap is highlighted by the growing popularity of trophy product.

JLL, for its part, looked at the increasing number of tenants in the DC market gravitating to non-core Class A and Class B buildings as rents in trophy properties increase. These tenants -- which tend to be associations or media or non-profits -- like the Class B product for several reasons, not only the cheaper rents.

So which analysis is the correct one? Well, both actually.

For all their surface differences, the story these firms are telling about DC are actually the same. They are just telling them from different vantage points.

Let's combine and rearrange their findings:

• The trend of downsizing and better space management and efficiency is behind both the move to trophy product and class B space. All companies, no matter how small or how established, want the ability to design offices to accommodate new workforce styles.

• However, if a company can have both -- a smaller, more flexible office footprint in a trophy class property –- then it is not difficult to guess which office they will choose.

• But if a company can't have both of these worlds, then it will make due with the next tier of office product – the Class Bs or non-core Class As. These companies are okay with this decision because 1) they probably are startups or companies in a high-competitive industry sector and can't afford the higher rents 2) they may very well prefer the open space and cheaper rent, all the better to spend on connectivity and technology 3) the stay at this building is likely to be a short one.

• That latter point is a key one. Many tenants occupying Class B buildings now hope or expect to upgrade to a new building some day when they get a more solid footing. If nothing else the workforce they hope to attract -- millennials -- will demand to be in a transit friendly, urban location.

• In the big picture -- which in this case is not defined as a time period when we will all be dead -- Class B property will become obsolete.

The Class B Crowd

"I think activity in the DC market has been driven at both ends of the spectrum – trophy and Class B," Scott Homa, Research Director for JLL, tells GlobeSt.com.

"But most of the demand we are seeing in the marketplace is from an organic growth perspective -- namely, tech firms and high-growth start ups." These companies are more value-oriented and short-term in nature -- and a natural fit for a lower-rent, Class B office.

"We have seen a great appetite among tech users and smaller groups for sub 50 per square foot growth spaces."

All that said, DC's office market has traditionally been characterized by a flight to quality, Homa says. "Over the long term trophy buildings capture strong positive net absorption."

"What has changed in DC is that we are not seeing net new growth in law firms -- and those tenants are two-thirds of our trophy market."

Buildings' Changing Lifecycles

Buildings in the city are also moving much faster through their lifecycles, Doug Mueller, managing director with JLL's Agency Leasing in Washington, tells GlobeSt.com.

"What was a trophy property yesterday might not be one today." A once Class A or trophy building that has inefficient floor plates, for example, is primed to drop into the B plus category if it hasn't already, he says.

"The functional obsolescence curve has become huge."

Class B tenants may or may not be aware of a particular building's point on the obsolescence curve, Mueller continues – it probably doesn't care. "The motivations of these companies are financially driven. As a start up you don't want to be committed anywhere for a long period of time. You have to be able to function like an accordion.

Trophy Buildings Positioned for the Long Run

Sandy Paul, NGKF's managing director of National Market Research, agrees that the two papers' conclusions are not in conflict, but rather are focusing on trends that they deem to be the most significant.

So while Class B is seeing activity, "the data are clear that since the recession the driving force in the market has been a flight to quality," Paul said.

"When you look at longer term statistics, particularly absorption, I think it is clear that the high-end properties are doing better and the more challenged properties are having a hard time attracting tenancy."

His trump card in this debate: look at the lease terms.

Class B tenants are signing short terms leases because they find the building adequate for their needs now. But where will they go once they want to move on? Companies that are signing longer-term leases are thinking about their needs for years down the road."