Ofce Market Snapshot
Washington, DC Fourth Quarter 2013
Market Tracker
*Arrows = Current Qtr Trend
Vacancy
10.6%
Net Absorption
60,138 SF
Deliveries
774,511 SF
Asking Rent
$49.32 FS
District of Columbia Ofce Market Closes 2013 with Below Average Market Fundamentals
Economic conditions in the District of Columbia seem to be improving across the board. However, the areas ofce market still has a way to go before reaching full recovery. Net absorption for the fourth quarter of 2013 registered 60,138 square feet (sf), bringing the 2013 absorption total to 550,900 sf. That is only about one-third of the markets 10-year average annual absorption of 1.4 million square feet. Modest market activity and two fully vacant deliveries caused the overall vacancy rate to rise 0.4 percentage points over the quarter to 10.6%. Average asking rental rates have remained at throughout 2013, uctuating only a few cents up or down and closing the year at $49.32 per square foot. WASHINGTON, DC OFFICE The fourth quarter of 2013 did see a few large leases signed, and unlike in the third quarter, less than half of the top 10 leases were renewals. Although deal volume was about average in the fourth quarter, there was little in the way of net growth. Major transactions inked in the fourth quarter included the lease of 115,300 sf at 1099 14th Street, NW by the Washington Design Center, an amalgamation of smaller design and furniture rms. The Design Center will move from 300 D Street, SW which has been purchased by a user and will eventually be converted to a museum. With the former building now owner-occupied, this means the entirety of the new lease will contribute to growth in the leasing market. This however, is offset by CSIS vacating 114,000 sf at 1800 K Street in a move to a newly delivered headquarters which it owns at 1616 Rhode Island Avenue, NW. Another signicant fourth quarter lease was that of PricewaterhouseCoopers. The accounting rm signed for 108,600 sf at 600 13th Street, NW, which will deliver newly renovated in early 2014. Continuing a new trend seen throughout 2013, GSA leasing was very light in the fourth quarter. In one of the only GSA relocations signed in 2013, the National Nuclear Security Administration inked a deal for 87,300 sf at 1201 Maryland Avenue, SW. The agency will be relocating from 955 LEnfant Plaza, SW and expanding by a mere 6,000 sf. While minor, this expansion is a reversal of the recent GSA trend of consolidations and short-term renewals. In keeping with more characteristic GSA activity, both the Department of Housing and Urban Development and the Federal Labor Relations Authority renewed leases for 39,800 at 1250 Maryland Avenue, SW and 33,500 sf at 1400 K Street, NW, respectively. While ofce construction in the District of Columbia is still at below-average levels, the fourth quarter did see three new deliveries. In the CBD, Carr Properties building at 1700 New York Avenue, NW completed construction and delivered 78% preleased to architecture rm Smith Group and law rm Sullivan & Cromwell. In the NoMa submarket, two ofce buildings delivered, both fully available as of year-end: Trammell Crows Sentinel Square II, a 289,500-sf ofce building located at 1050 First Street, NE and StonebridgeCarras Constitution Square Three, a 363,000-sf ofce building located at 175 N Street, NE. Nine ofce buildings remain under construction in the District of Columbia, and are scheduled to deliver in 2014 and 2015. Forecast
Economic Indicators
Q4 13
DC Metro Employment DC Metro Unemployment U.S. Unemployment U.S. CCI 2.50M 5.5% 7.2% 74.2
Q4 12
2.49M 5.5% 7.8% 70.4
Net Absorption
4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5
Square Feet (mil)
2007
2008
2009
2010
2011
2012
2013
Vacancy Rate
13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 2007 2008 2009 2010 2011 2012 2013
Congress has nally agreed on a budget through 2015. With more scal certainty among federal agencies, we may see more robust GSA lease activity a development that is much needed to bring the District of Columbias ofce market back to a position of health. A number of large renewals were close to execution at year-end, suggesting that the beginning of 2014 will see elevated gross leasing gures. The ofce construction pipeline slated to deliver in 2014 is 79% preleased, so large upticks in vacancy due to new deliveries are not expected. This, coupled with improving economic conditions will likely result in declining vacancy rates throughout 2014.
Historical Average
www.cassidyturley.com
Cassidy Turley Ofce Market Snapshot
Washington, DC Fourth Quarter 2013
TOTAL BLDG INVENTORY SUBLET VACANT TOTAL VACANT VACANCY RATE YTD CURRENT ABSORPTION ABSORPTION UNDER CONSTRUCTION AVERAGE ASKING RENT
Submarket
CBD East End West End/Georgetown Capitol Hill NoMa Southwest Capitol Riverfront/Southeast Uptown 253 198 59 44 39 35 11 97 736 38,967,167 38,522,051 6,019,052 4,642,579 10,289,374 13,516,238 3,736,758 6,489,940 122,183,159 422,565 267,395 33,043 25,942 17,791 20,927 17,590 27,161 832,414 4,609,970 3,520,952 344,973 290,521 1,665,401 1,322,618 696,605 464,382 12,915,422 11.8% 9.1% 5.7% 6.3% 16.2% 9.8% 18.6% 7.2% 10.6% (112,029) 137,061 19,519 25,546 (30,558) (17,460) (44,690) 82,749 60,138 346,779 175,785 152,871 88,177 175 (223,402) (41,373) 51,902 550,914 168,769 1,852,719 0 0 0 0 0 76,786 2,098,274 $50.20 $51.72 $46.75 $55.71 $46.53 $49.69 $44.23 $38.25 $49.32
Washington, DC Market TOTALS
preliminary
Key Lease Transactions 4Q 13
PROPERTY 1099 14th Street, NW 600 13th Street, NW 1201 M Street, SE 1201 Maryland Avenue, SW 900 16th Street, NW 799 9th Street, NW 1001 G Street, NW 1250 Maryland Avenue, SW 607 14th Street, NW 1805 7th Street, NW SF 115,300 108,600 103,600 87,300 83,600 65,600 62,600 39,800 36,500 35,300 TENANT Washington Design Center PriceWaterhouseCoopers CSC Advanced Marine Center GSA- National Nuclear Security Administration Miller & Chevalier Nixon Peabody Keller & Heckman GSA- Department of Housing and Urban Development Hill & Knowlton Strategies Teach for America TRANSACTION TYPE Relet New Renewal New New New Renewal and Contraction Renewal Renewal New SUBMARKET East End East End Capitol Riverfront/ Southeast Southwest CBD East End East End Southwest East End Uptown
Key Sales Transactions 4Q 13
PROPERTY 2000 L Street, NW 700 14th Street, NW 55 M Street, SE 2440 M Street, NW 801 North Capitol Street, NE SF 411,200 224,600 266,600 116,400 87,900 SELLER/BUYER Brookeld Property Group/ Rockrose Tishman Speyer/ Paramount Group, Inc. Monument Realty JV MacFarlane Partners/ Hines Washington Real Estate Investment Trust/ Harrison Street Real Estate Capital, LLC Brookeld Property Group/ ASB Capital Management PRICE $192,000,000 $183,000,000 $142,000,000 $61,614,600 $53,500,000 SUBMARKET CBD East End Capitol Riverfront West End/ Georgetown NoMa
About Cassidy Turley
Cassidy Turley is a leading commercial real estate services provider with more than 3,800 professionals in more than 60 ofces nationwide. With headquarters in Washington, DC, the company represents a wide range of clientsfrom small businesses to Fortune 500 companies, from local non-prots to major institutions. The rm completed transactions valued at $22 billion in 2012, manages approximately 400 million square feet on behalf of institutional, corporate and private clients and supports more than 23,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate servicesincluding capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com for more information about Cassidy Turley.
Bethany Schneider
Research Analyst 2101 L Street, NW Suite 700 Washington, DC 20037 Tel: 202.463.2100 Fax: 202.223.2989 Bethany.Schneider@cassidyturley.com
The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy. Copyright 2014 Cassidy Turley. All rights reserved.
www.cassidyturley.com
