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WASHINGTON, DC-The greater Washington area’s commercial real estate community is faring better than almost any other city in the country in the face of a crushing recession and credit freeze. New reports evaluating the District and the surrounding area’s health, though, are highlighting what will likely be a long standing drag on the commercial real estate industry for at least a few years: oversupply.

A new report by Kevin Thorpe, research director at Cassidy & Pinkard Colliers, for example, noted that 2009 will be the first year since 2001 that the DC region will experience net absorption. Then, in terms of new supply, it will get worse. “With 13.1 million square feet of new office product scheduled to deliver through 2011, the DC metro has more supply in the pipeline than any metro in the country,” Thorpe wrote. “Even assuming healthy net absorption estimates, the region will remain oversupplied at least through 2011.” The logical conclusion, of course: regional asking rents will be falling through 2011 and into 2012. The District itself, not surprisingly, will fare best of all. Indeed, Thorpe predicted that Downtown will post positive net absorption even through this year.

A separate report by Marcus & Millichap’s DC office has similar concerns about the area’s retail pipeline. Among other factors–namely the recession– persistent inventory expansion is expected to boost vacancy by 200 basis points to 7.3% this year. Last year vacancy increased by 170 basis points. Approximately 2.2 million square feet is expected to come online in suburban Maryland, and 1.9 million square feet is projected in northern Virginia.

Jones Lang LaSalle reported on the DC area’s overstuffed pipeline this Spring: noting that the percent of office buildings delivering this quarter preleased is substantially lower than normal–27%, compared to 50%.

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