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OFFICE SNAPSHOT
WASHINGTON, D.C.
A Cushman & Wakefield Research Publication
Q3 2013
ECONOMIC OVERVIEW
After much speculation throughout the third quarter, October 1st marked the end of hope that the U.S. Congress and Administration would agree on a budget to fund the current fiscal year, resulting in the shutdown of a number of government operations. On top of this, the debt ceiling debate is right around the corner. The impact on the market may be relatively minimal in the near term, but the longer both of these issues remain unsolved, the more negative the impact on the U.S. and local economy.
confidence in the market and demand continues to outpace supply for well positioned, core assets. Buyers are willing to accept low initial returns and wait out the current down cycle.
OUTLOOK
The current government dysfunction will only further fuel the uncertainty that has held back the private sector in the Washington market over the past two years, and could continue to delay pent up federal leasing decisions, and potentially, rent payments. Until both debates are resolved, tenants in D.C. will remain in a holding pattern, keeping market fundamentals at their current, below par, standing. STATS ON THE GO
Q3 2012 Overall Vacancy Direct Asking Rents (psf/yr) YTD Leasing Activity (sf) 12.7% $51.17 2,912,182 Q3 2013 13.7% $51.00 2,436,892 Y-O-Y 12 MONTH CHANGE FORECAST 1.0pp -0.3% -16.3%
LEASING ACTIVITY
6.0 5.0 4.0 3.0 2.0 1.0 0.0
msf
4.5
5.8
4.8
5.2
2009
2010
2011
LEASING ACTIVITY
2012
2013 YTD
For more information, contact: Paula Munger, Regional Research Director 703 448 1200 paula.munger@cushwake.com
The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2013 Cushman & Wakefield, Inc. All rights reserved.
2.4
WASHINGTON, D.C.
SUBMARKET INVENTORY OVERALL VACANCY RATE 11.6% 13.0% 13.6% 9.8% 15.2% 19.5% 16.1% DIRECT VACANCY RATE 11.2% 11.9% 12.1% 8.2% 11.5% 19.0% 15.1% YTD LEASING ACTIVITY UNDER CONSTRUCTION/ RENOVATION 624,367 590,000 290,237 0 0 0 0 YTD YTD DIRECT CONSTRUCTION/ NET ABSORPTION RENOVATION COMPLETIONS 138,552 99,107 592,736 196,181 0 98,000 0 0 136,163 58,645 92,342 (118,881) (203,754) 45,315 YTD OVERALL NET ABSORPTION OVERALL WTD. AVG ALL CLASSES GROSS RENTAL RATE* $48.21 $53.45 $50.79 $41.65 $37.43 $49.86 $43.08 DIRECT WTD. AVG. CLASS A GROSS RENTAL RATE* $57.61 $64.33 $62.33 $52.45 $42.65 $51.11 $47.76
Capitol Hill / NoMa East End CBD West End / Georgetown Uptown Southwest Capitol Riverfront
TOTALS
2,436,892
1,504,604
1,025,469
108,937
72,590
$50.05
$59.21
MARKET HIGHLIGHTS
SIGNIFICANT Q3 2013 LEASE TRANSACTIONS 1501 K Street NW* 1441 L Street NW* 1800 G Street NW* 1120 20th Street NW* 1800 M Street NW 601 Pennsylvania Avenue NW* 1828 L Street NW* SIGNIFICANT Q3 2013 SALE TRANSACTIONS 3000 & 3050 K Street NW 700 12th Street NW 2000 L Street NW 1200 19 Street NW 700 14 Street NW/1420 New York Avenue NW SIGNIFICANT Q3 2013 CONSTRUCTION COMPLETIONS 440 1st Street NW (Renovation) SIGNIFICANT PROJECTS UNDER CONSTRUCTION 601 Massachusetts Avenue NW 175 N Street NE 1050 First Street NE 1200 17th Street NW SIGNIFICANT PROPOSED PROJECTS
th th
SUBMARKET CBD East End CBD CBD CBD East End CBD SUBMARKET West End / Georgetown East End CBD CBD East End SUBMARKET Capitol Hill / NoMa SUBMARKET East End Capitol Hill / NoMa Capitol Hill / NoMa CBD SUBMARKET Capitol Hill / NoMa CBD
TENANT Sidley Austin LLP GSA Bureau of Economic Analysis The World Bank AT&T Berkeley Research Group Americas Health Insurance Plans DCI Group BUYER National Pension Service of Korea / Principal Financial Group Jamestown Rockrose Development Corp. Fosterlane Realty Paramount Group MAJOR TENANT Associated Builders & Contractors MAJOR TENANT Arnold & Porter N/A N/A Pillsbury Winthrop Shaw Pittman LLP MAJOR TENANT N/A Miller & Chevalier (LOI)
BUILDING CLASS A C C B B B B PURCHASE PRICE / $PSF $373,000,000/$669 $307,500,000/$730 $192,000,000/$467 $296,000,000/$886 $183,000,000/$815 COMPLETION DATE Q3 2013 COMPLETION DATE Q3 2015 Q4 2013 Q4 2013 Q2 2014 COMPLETION DATE Q1 2016 Q1 2016
SQUARE FEET 287,669 176,071 86,076 83,368 58,602 55,543 38,230 SQUARE FEET 557,961 421,235 411,165 334,175 224,558 BUILDING SQUARE FEET 138,552 BUILDING SQUARE FEET 478,000 345,000 279,367 168,140 BUILDING SQUARE FEET 340,652 127,825
For more information, contact: Paula Munger, Regional Research Director 703 448 1200 paula.munger@cushwake.com
The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals. 2013 Cushman & Wakefield, Inc. All rights reserved.