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News release


Washington D.C. Commercial Real Estate Market No Longer in Recovery According to Jones Lang LaSalle Q4 Market Report

Continued gridlock in Congress and European debt crisis stagnating the Washington market; ripple effect expected for the rest of the country in 2012

WASHINGTON, D.C., Dec. 29, 2011 – With the robust federal expansion of late 2009 and 2010 now a distant memory, the slow and indecisive leasing environment of 2011 appears destined to persist into the 2012 as a result of looming austerity measures, a gridlocked Congress and the pending election cycle according to the Q4 Insight Report from Jones Lang LaSalle.

In the last 12 months, the commercial real estate market in Washington region has wavered as leasing velocity plummeted and few new space requirements surfaced. Reduced tenant demand, combined with stable levels of office space, produced a modest uptick in vacancy rates and a downward shift in rents. Leasing activity throughout the Metro DC region was characterized by increased renewal activity and moves by tenants looking for greater operational efficiency. Submarkets benefitting from mass-transit accessibility and mixed-use amenities, like Rosslyn-Ballston, Bethesda-Chevy Chase and downtown Washington, DC, continued to do well, while many outlying areas suffered from oversupply and a distinct lack of tenant demand.

“As the Presidential campaign season kicks into high gear, everyone in the market will surely watch intently with hopes that the Congressional logjam is finally broken,” said Scott Homa, Vice President Research, Jones Lang LaSalle.  “Every other market in the country is looking at D.C. for guidance.  With a few exceptions, markets with strong technology and energy sectors, we expect to see a slow down in leasing across the country during 2012.”

2012 Outlook:
  • The inability of Congress to agree on a long-term federal budget is expected to prolong the stalled state of leasing activity in the Metro DC market. 
  • As the GSA focuses its efforts on creating efficiencies and cutting costs, tenants closely tied to the activities of the federal government are expected to remain on the sidelines or retrench as they await more clarity in regard to their future business outlooks. 
  • Renewals and consolidations are expected to remain prevalent. 
  • Without clear guidance on agency budgets – and an uncertain future in terms of government leadership – tenants across industry sectors are likely to maintain a "wait-and-see" approach to real estate decisions heading into the November 2012 Presidential election and potentially beyond.

Tenant Perspective
Tenants 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 Perspective
Although 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.”

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2010 global revenue of more than $2.9 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.8 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47.9 billion of assets under management. For further information, please visit our website,