C&W Predicts 13% Office Vacancy for DC Area

WASHINGTON, DC-The Bureau of Labor Statistics delivered some good news to the Washington, DC area earlier this year, Cushman & Wakefield’s director of research Paula Munger notes: essentially it nearly doubled its calculation of local employment in 2011, from an earlier, more conservative estimate. Still, this growth is not enough to cushion the Washington office market from what is shaping up to be a rocky year. Munger is basing her comments on a newly-released analysis by C&W of the economic forces driving the Mid-Atlantic commercial real estate markets.

“Vacancies will continue to rise over the course of the next year by at least 1%, to reach 13% or so,” Munger says. The good news is that by the end of 2013, that robust job market will have kicked in, finally leading to more lease activity in the office sector.

“This vacancy blip will be a 2012 phenomenon,” she says. “The market will be back to normal next year,” she adds, referring to DC’s traditional pattern of positive absorption. Already, “we’re seeing some growth in the legal-services industry, particularly among smaller firms, which is a testament to DC’s role as an essential location for some companies and industries.”

DC regained more jobs than expected

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The blip in growth, however, is especially frustrating given surprisingly healthy local job creation. As BLS quietly reported earlier this year, DC performed even better than many had realized in 2011 in terms of job growth. “Not only did they find that we regained all of the jobs lost during the recession but also we didn’t lose as many as originally thought.” BLS almost doubled its projections of 2011 job creation in the DC area to 31,000 positions, she says, an astounding increase.

DC on target to outpace US salaries.

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Nonetheless, it has not been enough to make up for the federal government’s scaling back in space needs and spending in general, Munger says. “Federal spending is expected to decrease so the government just won’t have as big as a role as it normally does.”