DC Suburbs Fare Well in First Quarter

WASHINGTON, DC–The District’s suburbs have fared well in the first quarter, according to Transwestern’s reports. Northern Virginia office fundamentals improved during the first quarter, with net absorption more than three times the 10-year quarterly average, while suburban Maryland’s net absorption totaled positive 95,000 square feet.

In Northern Virginia, Class B and C office properties outperformed Class A during the quarter, and Crystal City/Pentagon City was the submarket leader in net absorption, with American Institutes for Research leasing 87,600 square feet.

In Maryland, Class B led with 161,000 square feet of positive net absorption, while Class A lagged at negative 67,000 square feet. In the first quarter of 2018, the trade/transportation/utilities sector represented the largest share of leasing activity at 22%, followed by the financial services sector at 21%.

“The Suburban Maryland office market’s positive absorption and decrease in vacancy rates foreshadow our anticipated gradual improvement in the office market throughout 2018,” said Transwestern Managing Research Director Elizabeth Norton in a prepared statement.

Tenants have an upper hand in these submarkets with elevated concession packages. For deals signed during the first quarter of 2018, tenant improvement allowances averaged $66 per square foot with 11.5 months of free rent for a typical 10-year term on a new lease, Transwestern said. This compares to $63 per square foot and 10 months during 2017.

The majority of the pipeline is concentrated in Bethesda/Chevy Chase at 4747 Bethesda Ave. and 7272 Wisconsin Ave., as measured by square feet. There are four other projects in the pipeline totalling 466,000 square feet across Montgomery County and Prince George’s County, which are scheduled to deliver by year-end.