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Continued gridlock in Congress and European debt crisis stagnating the Washington market; ripple effect expected for the rest of the country in 2012
Tenant PerspectiveTenants in the Washington market eliminated moving and build-out expenses opting instead for lease renewals and consolidations. Relocations were rare and the moves that did occur frequently involved tenants taking anywhere from 10 to 35 percent less space as they right-sized their footprints.
Landlord PerspectiveAlthough tenant demand remained decidedly weak at the end of the fourth quarter, the lack of speculative construction deliveries and a shortage of new large blocks of space worked to the advantage of some owners. Based on the current development pipeline and the lack of groundbreakings there should be limited new supply through 2014.
There is however an abundance of small blocks of space and owners of second generation, Class B buildings are likely to face a difficult road as there are now large blocks of this commodity space available.
“Long-term the picture is much brighter,” added Homa. “Speculative construction is contained so there are finite space options for tenants at new buildings and a ceiling is being established in terms of new supply. As soon as the region returns to normalized job growth – about 45,000 new jobs a year – we could see a swift market recovery. However, given the lack of positive catalysts in the market today, finding an inflection point may take until the Presidential election in November 2012, or potentially beyond.”
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