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Office Report

United States | Washington, DC

Report | Washington DC Office Outlook - Q4 2010

Summary

Conditions shifted dramatically upward in 2010.  Large space blocks fell as government expansion propelled tenant demand and lack of new construction restricted supply.
  • Leverage in many submarkets has shifted back to landlords.  Rates are rising, and scarce quality space options suggest rent spikes in 12 to 24 months.  In some markets, rental terms have reverted to pre-recession levels.  Landlord concessions in some areas remain elevated.
  • Developers are mobilizing for spec construction in areas such as the CBD, Rossly-Ballston, NoMa, Southeast and East end.  Expect double-digit effective net rent growth meanwhile, as tenants get squeezed out of large block options.
  • Class A space in newer or technologically upgraded buildings is the most desired and expensive.  Many tenants are migrating there from outdated second-generation space in Class B buildings.  These resulting “holes” of product are the last values left in the market.
  • Investment sales roared back, more than doubling volume from 2009. 

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