Cassidy & Pinkard Colliers labeled Q3 as a turning point in terms of demand for office space in the DC region: the Washington metropolitan area office sector experienced an overall net absorption of negative 373,000 square feet--a significant improvement from the negative 748,000 square feet in the previous quarter. Also the area recorded positive net demand of 87,500 square feet.
CB Richard Ellis makes a similar assessment in its figures. Vacancy rates continue to climb, it notes, but the pace of declines is bottoming out. Vacancy rates jumped to 11.2%--and is expected to rise even further as spec supply continues to deliver throughout next year. Still, though, CBRE notes that tenant leasing activity is increasing--and in Q3 some 300,000 square feet of expansion space was committed. Vacancy rates will not be so problematic for Downtown or CBD, Ernest Jarvis, managing director of CBRE's Washington office. Emerging markets like the Capitol Riverfront or NoMa, however will continue to experience high vacancy rates for the next 24 months, he predicts to GlobeSt.com. What will likely happen is landlords in these areas will come down further on rent, thus providing tenants key opportunities to lock in space in new buildings.
Jones Lang LaSalle, as well, is calling for the bottom, at least in the DC and Virginia markets. Maryland has about another nine months to go, according to the assessment. The stabilization in these markets is due, not surprisingly, to the federal government.
Even Maryland is receiving a boost, in the form of activity from the life sciences and Fannie Mae. According to JLL, the market saw more than 500,000 square feet of new sublease space this quarter from those sources.
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