Q1 2023: Washington DC Office Market Report
The DC office market continues to struggle with high vacancy, negative absorption and stagnant rents. Though demand for Class A and Trophy-quality office space in highly amenitized buildings continues, the struggle is finding a landlord with strong financials that are not affected by continuously rising interest rates. District officials are pushing GSA decision makers and government officials to bring Federal staff back to the office as Kastle Systems back to work barometer shows the Metro’s highest office occupancy in the first quarter just shy of 50%. While flight-to-quality persists in Washington DC, vacancy rates in Class B buildings have registered a historical record of 20 percent at the end of the first quarter. In response, the DC Mayor has proposed a 20-year tax abatement to downtown landlords who reposition their office buildings to housing and mixed use. Total vacancy rates in the District of Columbia ended the first quarter at 18.8 percent, 150 basis points higher than a year prior. Average asking rent across all classes ended the first quarter at $54.81 per square foot, slightly lower than $54.90 at end of the fourth quarter. Sublease availability downtown is close to 4 million square feet.