Washington Metro Area Office Real Estate Market Reports

Washington Metropolitan Area Office Market

Net absorption for the region roughly totaled positive 1.2 MSF during Q4 2024. The District, Northern Virginia, and suburban Maryland all experienced positive net absorption to end the year on a high note across all three markets. Overall vacancy decreased 30 basis points to 21.0% from the third quarter of 2024, however, this is a 90 basis point increase from the year prior. Availability also contracted, ending 2024 at 24.9%, down 80 basis points from last quarter and 30 basis points year-over-year. Major second-quarter transactions were spread throughout the metro, with three of the five largest deals occurring in the District. The remaining two deals occurred in Northern Virginia. After five deliveries throughout 2024 totaling roughly 1.2 MSF, the office construction pipeline ended the year at 950,000 SF under construction spread across a further five properties.

District of Columbia Office Market

The District of Columbia experienced 487,840 SF of positive net absorption during Q4 2024. The vacancy rate declined 60 basis points quarter-over-quarter to 19.2% and decreased 50 basis points year-over-year. 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 Taking rents of trophy space continue to increase as the overall availability of space in trophy assets, regardless of where it is in the stack, decreases. Asking rents for trophy class have declined slightly. However, this is due to top stack space being occupied, with the remaining vacancies in trophy assets located mainly in the lower stack with lower rents, decreasing the overall average of trophy class asking rents. This sheer lack of supply will continue to put upward pressure on taking rents. Class B rents have increased 1.4%. The longer-term trend, however, shows that both Class A and Class B rents have remained relatively flat since 2019.

Suburban Maryland Office Market

Suburban Maryland saw positive activity during Q4 2024, with 46,000 SF of positive net absorption. This was the market’s first quarter with positive net absorption since Q1 2023. Overall vacancy ended the quarter at 20.3%, tightening 10 bps quarter-over-quarter, however expanding 110 bps 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. Asking rents continued to rise during 2024, however at a decelerating pace relative to recent years. Since the market saw a 4.2% annual increase in rents during 2020, the market has seen decelerating levels, ending 2024 with a 0.6% increase in rents.

Northern Virginia Office Market

Net absorption for the region totaled positive 585,215 square feet during Q4 2024, with the positive absorption spread out among many submarkets. Overall vacancy decreased to 22.7%, down 40 bps quarter-over-quarter and up 170 bps year-over-year. Availability also decreased, ending Q4 2024 at 25.4%, a decrease of 70 bps quarter-over-quarter and 90 bps year-over-year. Major fourth-quarter transactions were spread across Northern Virginia, with SAIC and Zeta Associates both signing renewals. Additionally, Gartner restructured their lease at 1201 Wilson Boulevard to make room for CoStar to move in after they purchased the building earlier this year. Rents have increased slightly in 2024, ending the fourth quarter at $35.95, an increase of 1.3% since the end of 2023. After Fuse at Mason Square and 12050 Inspiration Street delivered in the third quarter totaling 385,000 SF, the office construction pipeline ended Q4 2024 with three properties totaling 312,000 SF.