Lincoln Property Company’s in-house Research department advises clients on the constantly changing commercial real estate environment, helping them make quick market decisions, or plan long-term strategies. Please contact us to discuss the D.C. commercial real estate market today.
The Washington, DC office market currently consists of 821 buildings, over 25,000 square feet, totaling approximately 160.0 million square feet of rentable space. As of February 2023, the unemployment rate for the District of Columbia increased to 4.9%, while unemployment for the Washington, DC Metropolitan area decreased to 2.9%.
The DC Metropolitan Statistical Area (MSA) added 61,900 jobs from Feb 2022-Feb 2023, representing 1.9% growth YOY. Sectors adding the most jobs were Leisure & Hospitality with 24,200, followed by Educational & Health Services with 15,400, and the Government gaining 9,400. There were no GSA leases of significant size executed in the fourth quarter. Pillsbury signed the largest lease of the quarter with an 89,027-square-foot renewal at 1200 17th Street, NW in the CBD submarket. No buildings delivered, nor broke ground, in the first quarter. Four buildings, totaling $204,462,500, sold in the first quarter.
The Northern Virginia office market consists of 1,496 buildings over 25,000 square feet, totaling approximately 190.4 million square feet of rentable space. Northern Virginia added 40,800 net new jobs from February 2022 – February 2023, representing 2.7% growth YOY. Sectors adding the most jobs were Professional & Business Services with 10,500, followed by Leisure & Hospitality with 8,900; while the Government added 4,500. The unemployment rate in Northern Virginia ticked up from the previous quarter to 2.8%.
The Northern Virginia market recorded -399,759 square feet of net absorption in the first quarter 2023. Contributing to the negative absorption was BAE Systems vacating 133,806 square feet at 11487 Sunset Hills Road. Northern Virginia totaled 1,934,522 square feet of leasing in the first quarter. The largest lease executed this quarter was a 175,021-square-foot renewal by Raytheon at 22265 Pacific Boulevard in Sterling. There was no significant GSA leasing this quarter. There were four sales transactions in Northern Virginia this quarter, totaling $215,650,000.
The Suburban Maryland office market, which encompasses Montgomery and Prince George’s Counties, totals approximately 91.9 million square feet of rentable space in 898 office buildings of 25,000 square feet and greater.
Direct vacancy increased to 15.5% in the first quarter of 2023, up from 15.4% in the fourth quarter of 2022, and total vacancy increased to 16.7% in the first quarter of 2023, up from 16.4% in the fourth quarter of 2022. The market recorded an increase in net absorption in the first quarter of 2023 with -91,114 square feet absorbed, up from the -248,356 square feet absorbed in the previous quarter. Contributing to negative absorption was Boston Consulting vacating their 71,580-square-foot space at 4800 Hampden Lane. The largest lease signed this quarter was Halvik signing a 79,648-square-foot new lease at 7601 Ora Glen Drive. The largest office building sale in Suburban Maryland during the first quarter was the portfolio sale of 1616, 1601 & 1440 McCormick Drive in the Landover / Largo / Capitol Heights submarket for $75.0 M ($251 psf). The year-over-year unemployment rate in Suburban Maryland decreased to 2.7% in the first quarter of 2023, down from 3.8% in the first quarter of 2022. From February 2022 to February 2023 employment in Suburban Maryland saw a net increase of 14,700 jobs.
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