- Vacancy Hits Record High
For the first time in Washington D.C.’s history vacancy hit 20%. Class A product increased 10 bps from Q1 2023 to 17.8% while Class B dropped 30 bps to 22.4% and Class C rose 10 bps to 25%. YoY vacancy rose 110 bps with Class A increasing 40 bps, Class B rising 170 bps and Class C jumping 290 bps.
- New vs. Renewal
New deals increased 6% from Q1 2023 to 907K SF signed in Q2 while renewal activity jumped 35% from Q1 2023 leasing with 737K SF inked. Class A recorded 735K SF of new leasing and 362K SF of renewal activity in Q2 2023. Tenants continue to flock to quality in the East End and CBD, which made up 89% of Class A new leasing. New leasing got a boost from Crowell & Moring signing 199K SF at 600 5th- this is the first private sector new deal over 100K SF since Q4 2021.
- Crowell & Moring Lease Kicks off Construction in East End
The redevelopment of WMATA’s former HQ at 600 5th St has started after the law firm signed a 15-year 199K SF lease for the top five floors. Between 1700 M Street and 600 5th Street, CBD and East End will welcome just over 700K SF of trophy space in 2024 and 2026. These two projects combined are 56% pre-leased. And while downtown DC adds new buildings, NoMa may not see the SEC’s 1.2 MSF after all, as rumors of financing issues circulate.
- Outdated Office Continues to Sell for Resi Flips
2100 M St NW sold to apartment developer Post Brothers for $67 million ($221.56 PSF) The 300K SF building is slated to be converted into 300 apartment units in the CBD. The American Health Care Association sold its HQ at 1201 L Street NW for $14 million ($388.89 PSF) which will be razed for 145 affordable units and will be funded by a loan from the Amazon Housing Equity Fund which supports minority led developers.
- Law Firms Continue to Drive Leasing
Law firms made up 25% of gross leasing in Q2 2023. New leasing accounted for 71% of all legal leases - this was driven by Crowell & Moring at 600 5th St NW (downsizing by 81K SF with move) and Davis Polk at 1050 17th St NW (increasing by 20K SF with move). Hutton Andrew Kurth inked a 115K SF renewal and will contract by just over 70K SF at 2200 Pennsylvania Ave NW.