Skip to main content Skip to footer

Washington DC Office Report Q2 2022

Download Report

In the District, demand during the quarter was flat, an improvement from the start of the year. In the second quarter of 2022 employee occupancy plateaued at around 41 percent according to Kastle’s “Back to Work Barometer” after several months of growth. The number of deals being signed continued to remain strong. There were two deals signed over 100,000 square feet during the quarter with the Department of Justice’s new lease at 555 4th Street NW and Bank of America’s renewal and expansion at 1800 K Street NW. Additionally, there were 38 deals signed over 10,000 square feet versus 40 in the first quarter and an average of just over 30 per quarter in 2021. Notable private sector leases signed in the second quarter include Bank of America, FHI 360 and the Psychiatric Institute of Washington.

Supply & Demand

The District had 814,237 square feet delivered to the market split between five buildings highlighted by 670 and 680 Maine Avenue NW (Second Phase of the Wharf). 680 Maine delivered fully leased to long-time CBD resident and legal powerhouse Williams & Connolly. The willingness for this law firm to migrate to what was at one-time considered a tertiary market signals an important evolution in Washington, DC commercial real estate. 670 Maine Avenue was pre-leased upon delivery to PhRMA, a pharmaceutical manufacturing association, taking nearly 30 percent of the 255,750 square foot building.

Net absorption in the second quarter of 2022 was flat, with 17,577 square feet returned to the market, but not nearly as negative as the previous four quarter average of negative 270,475 square feet. Unlike other quarters, the second quarter was not as affected by significant downsizes from tenant moves. The most significant move came from the Williams & Connolly relocation to the Wharf where they took a similar amount of square footage that they came out of in the CBD. Some positive indicators in the market were seen, most notably the Bank of America and TikTok deals which expanded their presence at their current locations. This has been something that was lacking throughout the pandemic as tenants were wary of making any increases to footprints.

Rental Rate

Rental rates continued to decrease to end the quarter at $55.51 per square foot on a full-service basis. Rental rates decreased 
in both Class A and B space while Class C space increased by over a dollar from the first quarter. Build-out costs continue to remain high forcing owners to provide high tenant improvement allowances to attract tenants.

Vacancy

Despite the negligible negative absorption registered in the District, the delivery of over 800,000 square feet of new inventory resulted in vacancy increasing by 50 basis points. Vacancy ended the second quarter at 17.8 percent, up 100-basis points from the same time last year and over 300-basis points from the start of the pandemic. With the delivery of so much new inventory to the market and no new groundbreakings, only 1.4 million square feet was under construction at the end of the quarter. This will make any potential positive absorption in the upcoming quarters impactful in decreasing the vacancy rate.


dc report

Washington DC Office Report Q2 2022

Download Report