Trophy Asset Space Increases as Rents Drop

The broker's annual Trophy Market report says asking rents in thehigh-end office market fell 12.9% in 2009 as new supply surpassedtenant demand and the vacancy rate rose to 12.2%. At the same time,there was positive net absorption in the trophy market toward the endof the year and this trend is likely to continue, the report says.

Indeed, in Dec. 2009 and Jan. 2010 the trophy market experiencedvery robust growth, according to an earlier interview with Jones LangLaSalle's research manager Scott Homa. "The activity we do see isfalling disproportionately in the trophy market," he told GlobeSt.com.

Trophy inventory at the end of the year consisted of 37 existingbuildings totaling 12 million square feet. They were mainly locatedwithin the Central Business District and East End, but also includedthree buildings in Capitol Hill (101 Constitution Ave., NW, 300 NewJersey Ave., NW, and 51 Louisiana Ave., NW).

"From a demand perspective, we hit bottom in DC during the secondquarter of 2009, when tenants were reluctant to make any long-termreal estate decisions, but the overall picture has slowly improved asa result of new government initiatives and other leasing that followsclosely behind," Homa said. "The vast majority of tenants whodelayed decision making in early 2009 have been more active over thepast few months as confidence has returned to the financial marketsand quality space options have started to dwindle."

Also according to the report: Average triple-net asking rates at buildings under construction fellfrom $56.16 per square foot in the fourth quarter of 2008 to $52.50 inthe fourth quarter of 2009.Average triple-net rents at existing buildings fell from $47.47 persquare foot to $45.52.Concessions for trophy transactions executed in 2009 contained anaverage improvement allowance of approximately $90 per square foot,with additional free rent typical in new deals.