Office vacancy in Washington, DC rose to 22.6% in 2Q 2025 as the result of the loss of 395,984 square feet of occupancy, largely due to contractions and termination notices issued by the Trump administration, according to a new report from CBRE. Vacancy could have been worse in the first half if not for space coming offline for conversion or redevelopment to other uses.
The report covers only the city itself, not the greater Washington, DC metro area.
“Federal lease activity has declined overall from prior years, impacting aggregate D.C. lease volume,” the report stated. Indeed, the public sector was responsible for 850,000 square feet of occupancy loss in the period, and most of its new leasing has been paused. However, the planned move of FBI headquarters out of DC to surrounding areas has been canceled; it will now be housed in the Ronald Reagan Building and International Trade Center, the former home of USAID.
Recommended For You
Despite the current increase, CBRE predicted that vacancy will fall in the higher-quality segment of the DC market due to a limited pipeline, high construction costs and a lack of sites suitable for development. “Trophy and A+ properties have experienced an aggregate 534,420 sq. ft of occupancy gain in 2025 and are seeing a stark increase in achieved rental rates. With Trophy vacancy at a near record-low 11.5%, demand will shift further into the A+ market, while also shifting towards standard A properties that are well-located, well-capitalized, and recently renovated,” the report said.
In total, 3.4 million square feet of office space was leased in 1H 2025 – less than the historical total of four million square feet. Much of that was thanks to law firm activity, which represented 35% of all leases signed in DC. Relocations in search of quality space accounted for two-thirds of this activity.
Among the largest deals were leases signed by two major law firms for space in the new office complex to be built by BXP at 725 12th Street. It will replace a 300,000-square-foot, 12-story property purchased for $34 million in December 2024 that BXP plans to demolish and redevelop into an approximately 320,000 square foot premier workplace. McDermott Will & Emery has leased 150,000 square feet, with Cooley LLP securing 126,000 square feet.
Also boosting DC occupancy were business and financial services firms, which represented 12% of DC’s lease volume in 2025 and raised occupancy by 85,000 square feet this year– the third-highest share among sectors.
Currently, only one office building, 600 5th Street, is under construction in DC. Apart from the BXP project, that situation is unlikely to change much in the next five years because of investors’ strict requirements and the average four-year period to completion, the report said. “This has driven larger tenants looking for Trophy office stock to enter the market increasingly early to secure their ideal space in a new development.”
There was a small increase in asking rents, which rose 0.2% in 2Q 2025 to $58.63 per square foot on a full-service basis, helped by the strength of the Trophy market. Concessions dropped for the third consecutive quarter. Overall packages now average $240 per square foot. Tenants are in search of the best-capitalized properties especially buildings with reset bases or that have no property-level debt.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
