Washington DC

MARKET OVERVIEW

With over 420 million square feet of competing office space, the Washington, DC metropolitan area is one of the largest markets in the United States.  The region encompasses portions of Maryland and Northern Virginia along with the city limits of the District. Market statistics and demographic information within the area are usually calculated and viewed by submarkets. Each submarket represents a specific community with its own unique characteristics, with average rental rates that can sharply vary within each one.

District of Columbia. Our nation's capital of Washington, DC ranks among the most highly regarded cities in the world.  It is home to one of the highest concentrations of museums and cultural institutions and attracts a highly diversified population. The DC region has the second largest office market in the United States, with the Washington, DC proper containing roughly a third of the area’s inventory. 

Submarkets for the District are divided into specific clusters, such as Capitol Hill, CBD (Central Business District), Georgetown, Uptown, NW, SW, SE, West End, and East End.

Maryland. The proximity to the Federal Government‘s principle pharmaceutical funding and regulatory agencies has made Suburban Maryland into one of the Nation’s largest biotech markets.  The region has roughly a quarter of the area’s inventory; is home to the National Institutes of Health, Food and Drug Administration and various pharmaceutical companies.  The area is served by a well-developed mass transit system, large healthcare and medical research institutions, and a robust amenity base.

Most of the activity in the Maryland suburbs comes from Montgomery County, and intermittently from Prince Georges and Howard Counties.  The main clusters include the I-270 corridor, Rockville/Gaithersburg, Chevy Chase/Bethesda, Greenbelt, and Silver Spring. Slower moving than the previous two, the office market in Maryland reacts less vigorously to trends and changes, affecting its vacancy and absorption activity on a more measured scale.  An example of that planned growth comes from the incubation of the bio-tech community, among several other industries, which has slowly gained momentum within Maryland, partly as a result of Montgomery County’s economic development efforts to lure this growing industry to the area. 

Virginia. While the region’s tenant base is largely comprised of Federal Agencies, such as the Department of Defense, and their associated contractors, Northern Virginia is also home to a number of Fortune Five Hundred Companies and is turning into one of the nation’s leading Data Center hubs. With an economy largely reliant on procurement and government spending, the region has grown significantly over the last ten years. This demand resulted in the Northern Virginia area comprising of just over two-fifths of the DC area’s corporate real estate inventory.

The main submarkets of the Northern Virginia market include the cities of Alexandria, Falls Church, and Fairfax, along with Arlington and Fairfax Counties.  The breakdown continues into multiple clusters depending on the location within each of these counties, and too numerous to mention. Benefiting from its position as a suburb of Washington, DC, Northern Virginia continues to thrive, in part, due to businesses' needs for more options and lower rental rates than those available in the District.

As a company exclusively representing office space users, Cresa is able to serve these ever-growing tenant needs through its three offices in Maryland, DC, and Virginia.   The DC office has a proven track record of providing long-term business planning solutions which ultimately saves their clients’ money.

Lease Audit Division

Welcome to Cresa's Lease Audit Division, the Washington, DC region’s leader in operating expense and real estate tax pass-through reviews. We specialize in thoroughly examining our clients' lease documents to assure that their lease and accompanying pass-through expenses are being properly administered by the landlord. In our experience, we find that a majority of landlord pass-through statements require further review, and half the time our closer look results in savings for our clients. Please contact us to learn more on how our success has saved our clients millions of dollars in the past few months alone.

Desktop Audit 101

Why do a "desktop" audit?

• To determine your actual "all-in" lease costs
• To determine if your lease and lease pass-through escalations are being properly administered
• To determine if there have been any mistakes resulting in possible overcharges
• To determine if your "all-in" costs exceed the building's market rate

Types of errors

• Inadvertent Errors - Inclusion of expense items that should not be passed-through to the tenant under the terms of the lease
• Calculation Errors - Mathematical errors and/or the use of factors that are not specified in the lease
• Intentional Errors - Landlord's conscious effort to pass-through expenses that cannot be passed through under terms of a lease.

Common mistakes made as a result of these errors

• Improper or no gross-up of variable expenses
• Operating expense exclusions
• Incorrect base year or base amount
• Early commencement of pass-through liability
• Incorrect proportionate share
• Incorrect accounting methodology: cash vs. accrual
• Calendar vs. fiscal year real estate taxes
• Incorrect sublandlord billings

Cresa will perform your desktop audit

• We read more than 150 leases each year
• Cresa's team includes in-house CPAs and MBAs who have commercial property management experience
• Cresa's lease auditors have formal training in the lease and associated documents
• Cresa has numerous resources for comparing market ranges for expense items, including BOMA reports
• Cresa's lease auditors know the acceptable psf ranges for line items such as utilities, cleaning, management fees, insurance, repairs and maintenance, etc

What Do I Need for a Lease Audit?

Lease Audit / Abstract Checklist

• Lease (or Sublease)
• Amendment(s)
• Estoppel Certificate(s)
• Current Rental Invoice
• Next Year's Estimated Pass-Through Statement
• Current Year Actual/Estimated Pass-Through Statement
• Previous Years' Actual Pass-Through Statement (past 3 years, recommended)

Contact our Lease Audit Services for more information.

Lease Audit Services

Michael Hetchkop

Senior Vice President
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Andrew J. Board
Senior Advisor
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