Washington, DC

Cassidy & Pinkard Colliers today announced that the third quarter was a turning point in terms of demand for office space in the DC region. The Washington metropolitan area office sector experienced an overall net absorption of negative 373,000 square feet, which was a significant improvement from the negative 748,000 square feet reported in the previous quarter. Moreover, Washington, DC recorded positive net demand of 87,500 square feet, a healthy rebound from the negative 231,000 square feet reported in the second quarter.

“The DC economy is growing again. Unprecedented fiscal and monetary support has helped to stabilize the national and local economy, and business confidence has more than doubled since the low point of the economic recession,” remarked Kevin Thorpe, Vice President, Director of Market Research. “The DC precinct is once again creating jobs, and demand for office space is improving.”

Overall, vacancy rates in the DC region increased from 12.3 percent in the second quarter to 13.1 percent in the third quarter. According to CoStar, average asking rents fell from $35.40 per square foot to $34.60 per square foot.

“Vacancy continues to rise, and rents continue to fall, but the improvement in demand is the first step to the recovery in commercial real estate,” added Mr. Thorpe.

Third quarter results in the three jurisdictions in the region are as follows:

Washington, DC – Net absorption was a positive 87,500 square feet, up from negative 230,900 square feet. In the third quarter; vacancy was 10.3 percent, up from 7.8 percent a year ago. According to CoStar, average asking rents fell 1.6 percent from a year ago to $47.15.

Northern Virginia – Net absorption was a negative 287,200 square feet, an improvement from the negative 664,600 square feet reported in the second quarter; vacancy ended the quarter at 14.4 percent, up from 11.9 percent a year ago. According to CoStar, average asking rents fell 5.8 percent from a year-ago to $29.50.

Suburban Maryland – Net absorption was a negative 173,200 square feet, down from positive 147,500 square feet in the second quarter; vacancy ended the quarter at 14.9 percent, up from 12.8 percent a year ago. According to CoStar, average asking rents fell 5.2 percent from a year-ago to $27.10.

“Whereas net demand in DC is likely to have bottomed out in the second quarter, labor market conditions remain weak in Northern Virginia and Suburban Maryland,” stated Mr. Thorpe. “However, a government-led boom is in the works for the Washington, DC region, with job growth starting in downtown DC and eventually spreading out to the suburbs. The second half of 2010 throughout 2011 will be robust demand years for the DC region’s office sector.”

Cassidy & Pinkard Colliers also reported today that investment sales volume increased to $734 million in the third quarter of 2009, up from $240.7 million in the previous quarter. Average price per square foot rose from $269 in the second quarter to $348 in the third quarter.

“The pricing is obviously skewed by the fact that the sample of sales is quite small, so a deal like 1999 K Street for $831 per square foot can pull the entire average upward,” commented Thorpe. “Nevertheless, pricing on core office buildings in DC appears to be stabilizing, and given the robust fundamentals of this local economy, it is difficult to create a scenario where core office prices in DC will fall a great deal more from where they are today.”

Click here for the full Cassidy & Pinkard Colliers Market Insights Report. 

About Colliers International

Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 12,700 employees span the world in 294 offices in 61 countries. On a worldwide basis, Colliers manages 1.1 billion square feet, and has revenue of $US 1.6 billion.

Contact Information

Maureen Wheeler
Vice President, Corporate Communications
202-463-2100
Maureen.Wheeler@cassidypinkard.com

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