Office vacancies still on the rise in D.C.

In the first quarter, office leasing volume jumped by 700,000 square feet compared to a year ago in Washington, D.C, yet the vacancy rate reached another all-time high, laying bare the struggles of the market.

Tenants signed on for 1.7 million square feet from January to March, Bisnow reported. That’s a major jump from the 1 million square feet transacted in last year’s first quarter, according to data from Savills.

The volume was the most for any first quarter since the start of the pandemic. The leasing volume was also very close to the five-year quarterly average for the market.

While that’s a sizable jump, the nation’s capital doesn’t appear to be attracting significant tenants to its office space. Eight of the ten largest deals of the quarter by volume were renewals, space extensions or restructurings, according to Savills. The three largest deals, which accounted for 785,000 square feet, were all renewals; the Washington Post led the way with an early extension on its 300,000 square feet at Hines’ One Franklin Square.

More than half of the first quarter’s deals were renewals, according to JLL data. Other tenants, meanwhile, are abandoning spaces or downsizing, creating a vast wasteland of empty office space. 

Net absorption in the first quarter was negative as tenants gave back 424,000 square feet. Savills recorded an even more significant negative net absorption of 550,000 square feet in the first quarter, though that paled in comparison to the negative net absorption of 900,000 square feet in the first quarter last year.

The vacancy rate in D.C. for the first quarter was 19.4 percent, according to Colliers, representing an all-time high for the market. The vacancy rate stood at 19.1 percent in the fourth quarter and 18.5 percent in the previous first quarter.

“What it really tells us is that we still have companies that are downsizing and moving to smaller spaces, and we’re going to continue to see that,” JLL’s Tammy Shoham told Bisnow.

— Holden Walter-Warner

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