Fed Demand Far Outranks Private Office Sector

According to the report, more than five million square feet of new office absorption will take place in Washington, DC by the end of the year, significant in that the rest of the net public and private demand across the United States does not come close to that number. "I'd say it would make sense for brokers to be targeting federal agencies rather than private agencies," says Scott Homa with JLL. "It's one of the few sectors of the economy that's growing and adding jobs, as the private sector retrenches to look for more efficiency and ways to preserve capital."

He says the government sector should continue with high demand for up to two years, as agencies related to federal oversight, health care, Homeland Security and the defense industry expand. The only hiccup could come during the midterm election process, Homa says. "When Congress and the Presidency are not in alignment, there tends to be a reduction in federal spending." Also, in a couple years, a rising budget deficit could usher austerity and slower growth, he says.

Transactions by organizations like the US General Services Administration are cropping up everywhere around the country, such as the agency's recent agreement to lease in full the 330,000-square-foot One Constitution Square building in Washington, DC or the GSA's recent lease there. A 500,000-square-foot new home for the National Personnel Records Center in St. Louis is also under construction.

The agencies are being more savvy about space needs than in years past, Homa tells GlobeSt.com. "There's a lot of consolidation, especially in DC. Where they may have taken space in a number of buildings, now they're working to go to maybe one building for more efficiency," he says. Also, while Manhattan still leads in rent prices, the office demand capital is by far the DC area right now, Homa says.