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DC emerging market office vacancy will drop below 10% and drive office rent growth in the near-term

  • ​The emerging Washington, DC office submarkets of Ballpark, NoMa, Market District and Southwest (including The Wharf) will capture more than 2.5 m.s.f. of occupancy gains through 2021, which will cause vacancy to decline from 12.6% to 9.8% and continue to place upward pressure on rents, which have risen above $50 p.s.f. FS for relet product and into the upper-$50s for new construction (outside of The Wharf).

  • In recent year, the emerging market office tenant base has diversified from federal agencies and contractors to nonprofits, associations, media companies, tech firms and coworking providers. What has attracted these new tenants? An increasingly mixed-use environment: more than 6,000 multifamily units exist across the four emerging submarkets and more than 2,000 units are under construction. Similarly, retail openings have soared with more than 120 retailers opening in 2017 or slated to open in 2018.​

  • As developers in the core reposition government buildings and target private sector tenants, agencies have been forced to relocate to product in the emerging markets priced below the $50 p.s.f. FS prospectus cap. That said, only four options >100,000 s.f. exist today at that price point.

  • As the emerging markets continue to thrive, land prices have escalated which have forced developers to pivot away from targeting federal agencies and toward the private sector, pricing proposed office product in the low $60s p.s.f. FS. Developers are not only resetting price points, but are also designing these developments with unrivaled amenities and vistas, which will lead to even more demand.​

Source: JLL Research

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