Washington Metropolitan Area Office Market
Net absorption for the region totaled negative 1.2 million square feet during Q1 2024, with all three metro area markets experiencing net negative demand. Overall vacancy expanded to 21.0%, up 40 basis points over the quarter and 140 basis points year-over-year. Availability also expanded, ending Q1 2024 at 25.4%, an increase of 40 basis points quarter-over-quarter and 170 basis points year-over-year. Major first-quarter transactions were comprised entirely of lease renewals, with the top three transactions occurring within the District, while the next two transactions occurred in Northern Virginia. After one delivery during the quarter, the office construction pipeline ended Q1 2024 at 2.0 million square feet. The building that delivered was 915 Meeting Street in North Bethesda, which was 45% preleased at the time of delivery.
Download Washington Metropolitan Area Office Market Report 1Q24
District of Columbia Office Market
The District of Columbia experienced 81,000 SF of negative net absorption during Q1 2024. This led to the vacancy rate increasing slightly, ending Q1 2024 at 20.3%, up 10 basis points quarter-over-quarter and 140 basis points year-over-year. The District of Columbia’s development pipeline remains historically low, with no deliveries during Q1 2024 and only two properties under construction totaling 736,000 SF. 17XM is a 336,000-square-foot office building under construction in the CBD and 600 Fifth is a 400,000-square-foot office building under construction in the East End. Overall, asking rents dipped slightly to begin 2024. Class A rents were the cause of this, as they decreased 3.4% quarter-over-quarter, while Class B rents increased 0.4% quarter-over-quarter. The longer-term trend, however, shows that both Class A and Class B rents have remained relatively flat since 2019.
Download District of Columbia Office Market Report 1Q24Suburban Maryland Office Market
Suburban Maryland’s net absorption totaled negative 367,200 square feet during the first quarter. Overall vacancy increased to 19.6%, up 120 basis points over the past year. After a building boom over the past five years, the pace of new construction deliveries has begun to slow, with only two office deliveries in Suburban Maryland in all of 2023 and no deliveries during the first quarter. Furthermore, only two properties remain under construction in the market, totaling 257,000 square feet. While overall asking rates increased this quarter, it is expected that they will reset in the coming quarters, as landlords are forced by liquidity constraints to trade elevated concession packages for lower rates. As in other markets, Class A and trophy space in Suburban Maryland has outperformed Class B and C space. This is illustrated in the continued increase in Class A asking rents while Class B asking rents have started to decline.
Download Suburban Maryland Office Market Report 1Q24
Northern Virginia Office Market
Northern Virginia’s net absorption totaled negative 759,433 square feet during the first quarter. The office construction pipeline has remained at 1.0 million square feet for the past six quarters, with no new deliveries or groundbreakings since the third quarter of 2022. Overall office vacancy increased to 22.1%, up 40 basis points over the quarter and 100 basis points from 12 months ago. Rent growth has continued throughout the current cycle, albeit at a decelerating rate. Average asking rents increased 0.6% over the past 12 months but declined slightly from the fourth quarter of 2023.
Download Northern Virginia Office Market Report 1Q24