WASHINGTON, DC–In theory job growth is a reliable indicator for future office space demand. Unfortunately for the Washington DC area, this link is no longer so clear cut, at least for this particular cycle.

“We have had fairly robust job growth, but it is not translating very well into office demand growth,” CBRE Research Manager Wei Xie tells GlobeSt.com. The reason is clear: the area is still working through shadow vacancy. Also, Xie says, workplace strategies and design changes are still having an impact. For these reasons, she says, “it's going to become more and more difficult to predict demand” using traditional metrics such as job numbers or job number projections.

Further muddying the picture — at least in terms of predicting office demand — there are signs that growth for the region will remain flat, as the Washington Leading and Coincident Indices have started to moderate. Says Newmark Knight Frank in a recent report:

This suggests that the current pace of growth will carry into the beginning of 2018, which would lend credence to the consensus of economists who predict that the next downturn will occur in late 2018 or 2019.

That said, to date the area has, as Xie noted, delivered a strong number of jobs.

According to NKF, for the 12 months ending in October 2017, the region added 46,400 jobs, down slightly from 2016. However, this compares favorably to the metro's 20-year average growth of 44,200 jobs per annum. The region's unemployment rate was 3.6% in October 2017, down 30 basis points from 12 months prior.

Another point of interest for the office community: the region's largest employment sector, at 23% of the region's total employment, was Professional and Business Services. NKF notes that this sector added 13,300 jobs in the 12 months ending October 2017, or 28.7% of the total jobs added.

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Why DC Is Having A Hard Time Predicting Office Demand

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