Washington Metropolitan Area Office Market
Net absorption for the region totaled negative 800,000 SF during Q3 2024, with The District and Northern Virginia experiencing negative net absorption while Suburban Maryland countered with positive net absorption. Overall vacancy increased slightly to 21.4%, up 30 basis points over the quarter and 170 basis points year-over-year. Availability also expanded, ending Q3 2024 at 26.2%, unchanged from last quarter and 180 basis points year-over-year. Major second-quarter transactions were spread throughout the metro, with the top two transactions occurring in the District with the Voice of America lease and Fannie Mae’s lease renewal/contraction, and the third largest transaction occurring in Northern Virginia with the Bechtel Corporation lease renewal. After three deliveries during the quarter totaling 420,000 SF, the office construction pipeline ended Q3 2024 at 860,000 SF.
Download Washington Metropolitan Area Office Market Report 3Q24
District of Columbia Office Market
The District of Columbia experienced 107,571 SF of negative net absorption during Q3 2024. The vacancy rate declined 10 basis points quarter-over-quarter at 20.2%, although increased 100 basis points year-over-year. The District of Columbia’s development pipeline remains historically low, with no deliveries during the quarter. The sole property under construction in the district is 600 Fifth, a 400,000-square-foot office building in the East End. Overall, asking rents have decreased slightly during 2024. Class A rents were the cause of this, as they have declined 2.4% year-to-date, while Class B rents have increased 1.6%. The longer-term trend, however, shows that both Class A and Class B rents have remained relatively flat since 2019. The rent spread between direct and sublet deals has settled around $10, after having spiked in 2020 and 2021 when it hovered around $12 to $14.
Suburban Maryland Office Market
Suburban Maryland’s net absorption stayed relatively flat during Q3 2024, totaling negative 10,943 square feet. Overall vacancy ended the quarter at 19.7%, flat quarter-over-quarter and 170 basis points higher year-over-year. After a building boom over the past five years, the pace of new construction deliveries has begun to slow. 2023 only saw two office deliveries in Suburban Maryland and there have been no deliveries in 2024. Furthermore, only one property remains under construction in the market. As in other markets, rents for Class A and trophy space in Suburban Maryland have outperformed Class B and C space. In terms of lease type, renewals continue to drive leasing volume as the four largest leases of the third quarter were renewals.
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Northern Virginia Office Market
Net absorption for the region totaled negative 714,000 square feet during Q3 2024, with the negative absorption spread out among many submarkets. Overall vacancy expanded to 23.1%, up 70 bps quarter-over-quarter and 230 bps year-over-year. Availability also expanded, ending Q3 2024 at 27.4%, an increase of 160 bps quarter-over-quarter and 120 bps year-over-year. Major second-quarter transactions were spread throughout the region, with Bechtel Corporation renewing in Reston, CACi renewing in Rt. 28 South, and Cvent renewing in Tysons Corner alongside Alarm.com. Furthermore, renewals were a theme of Q3 2024, with the four largest deals being lease renewals. Rents have remained relatively unchanged in 2024, ending Q3 2024 at $35.47, an increase of 0.1% since the end of 2023. After two deliveries totaling 385,000 SF during the quarter, the office construction pipeline ended Q3 2024 at one property totaling 222,000 SF.
Download Northern Virginia Office Market Report 3Q24