Federal agencies dominated the top leases in the second quarter. Four of the top five leases signed were Federal renewals that totaled over 1.7 million square feet. The largest private sector deal was WeWork’s 111,273-square-foot lease at Capitol Crossing located at 200 Massachusetts Ave NW.
Shared office space providers continued to take more space in the market and accounted for most of the positive demand in the market. Not only did WeWork sign at 200 Massachusetts Ave NW, but they signed for another 25,000 square feet at 660 North Capitol Street NW. Common Grounds, another shared office provider, signed for 30,000 square feet at 1500 K Street NW. Additionally, they are close to signing another larger lease in Southeast.
Demand & Supply
The second quarter produced the largest positive net absorption spike in nearly 8 years. Nearly a third of the 622,643 square feet of positive demand came from two tenants. WeWork moved into 1701 Rhodes Island for just over 100,000 square feet and the International Finance Corporation expanded by 150,000 square feet into 2100 K Street NW.
The final building of the Department of Justice (DOJ) headquarters delivered in the second quarter. The 520,000-square-foot office building commenced after the DOJ signed in late 2015. In total the DOJ now occupies roughly 1.4 million square feet in the NoMa submarket.
Signal House, the speculative high-end office building, also delivered during the quarter. The Carr development is targeting the private sector market, which is rare in the Federally dominated NoMa submarket.
Despite delivering 676,550 square feet to the market, the District still has over four million square feet under construction. Nearly 2.5 million square feet is expected to deliver in the second half of 2019, with just half of that space pre-leased.
Vacancy decreased during the quarter on the heels of some significant positive net absorption. This will likely be offset as millions of square feet are set to deliver.
Average asking rental rates at the end of the second quarter decreased by $0.46 to end the quarter at $56.22 on a full-service basis. This breaks the three-quarter streak of rising asking rates but is still above the rate at the end of 2018 when it was $56.17.