WASHINGTON, DC—Washington DC has one of the highest lease concessions among all of the major US CBD markets, according to CBRE. Abatements have more than doubled since 2008, and are now approximately one free month per year of the term of the lease. Meanwhile, tenant improvement allowances (TIAs) for private-sector leases have risen significantly since 2012 following the law firm contractions and slowdown in federal government leasing. According to CBRE, TIAs now average $74 per square feet when normalized for 10-year terms, making the average TIA-to-rent ratio 1.3x.

Now, here's the rub: for some office users that ratio is higher and for others it is lower.

The ratio is higher for nonprofits, at 1.6x. According to CBRE, several nonprofit leases in 2015 with base rents in the low $50s per square foot achieved TIAs between $90 and $110 per square foot.

The ratio is lower for law firms, a group that was once the bedrock of Washington DC's commercial real estate market. But their influence hasn't waned that much among landlords, so how is it the ratio is lower? Indeed, CBRE notes that law firms are still seek out prime office space and command higher-than-average TIAs at $99 per square foot in 2015. Yet, the TIA-to-rent ratio is 1.4x, which is above the overall market average, but lower than nonprofits' ratio.

The reason for nonprofits' higher TIA-to-rent ratio is simple, Revathi Greenwood, director of Research and Analysis at CBRE explains why. The reason, she told GlobeSt.com, is simple: “2015 was a year in which nonprofits grew a lot here so the rent to TIA ratio is reflective of that.”

This is more than just an interesting data point about the local market dynamics, however. Greenwood suggests other office-using sectors use it “as a negotiating point” to secure better TIAs or other concessions.

Now, here's the rub: for some office users that ratio is higher and for others it is lower.

The ratio is higher for nonprofits, at 1.6x. According to CBRE, several nonprofit leases in 2015 with base rents in the low $50s per square foot achieved TIAs between $90 and $110 per square foot.

Instant Insights /

CBRE Explains Why Non-profits Have a Higher TIA-to-Rent Ratio in the District

Related Stories

Recommended For You