WASHINGTON, DC–Morrison & Foerster's decision to take 81,300 square feet at 2100 L St., a 190,000-square foot trophy office that is expected to break ground in the second quarter of 2018, is indicative of larger trends in the District now.

One, of course, is the large supply of trophy office buildings entering the pipeline, a flow that will only keep the current tenant-friendly market going longer.

As JLL noted in its recent Skyline report:

Law firm preleases are kicking off new developments and flooding the Trophy and Class A markets with availabilities. Spec development in the core is only 30% preleased and almost 4 million square feet of new space priced above $75 per square foot is being marketed.

The supply is also diminishing fundamentals for this asset class. As JLL noted:

As supply outpaces demand in the near-term, the Trophy market will see rising vacancies and a decline in net effective rents in the 7-10% range.

Its decision also highlights another, less-noted trend, which is that law firms are returning to the CBD after spending the early 2000s relocating to the East End. This trend was also covered in a separate JLL research note recently. Now the East End is fully built out, of course, with not only office but also multifamily and retail properties and so large law firms relocation patterns have shifted west again, JLL wrote — particularly as more than 20 aging buildings in the CBD are being redeveloped to Trophy and Class A+ quality.

From 2010 to 2017, 11 of the 13 law firms that signed leases larger than 50,000 square feet to relocate to a new submarket moved from the East End to the CBD, with the remaining two firms relocating from the East End to Capitol Hill and the Wharf.

Corporate Office Properties Trust acquired a majority stake in 2100 L St., from Akridge at the end of 2015. At that time the companies said that construction could start in early 2017, with delivery in late 2018 or early 2019. Now the building is slated to deliver in the first quarter of 2020. Morrison & Foerster's 15-year lease is scheduled to begin in January 2021.

With this transaction, the building is 43% pre-leased. When the 10,000 square feet allotted for street-level retail space is taken into account 2100 L's office square footage is 45% pre-leased.

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Morrison & Foerster Follows Trend of Law Firms Returning to CBD

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