Q1 2024 Washington DC Office Market Report

The office market in the Washington D.C. area experienced heightened transaction velocity relative to the last quarter. Despite this, net absorption remained negative, leading to vacancy rates reaching just under 21 percent. Renewals made up over half of the leasing activity in first quarter, with the East End submarket landing two of the biggest transactions of the quarter, totaling over 500,000 square feet. Overall, the Central Business District and East End remained the most active submarkets in terms of leasing activity.

The first quarter of 2024 saw 1.7 million square feet worth of leasing volume, with 200,000 square feet concentrated in the trophy-quality buildings. Trophy-quality buildings continued to see tightening supply relative to other asset classes, as smaller footprint requirements help offset costs for tenants. With high construction costs, new development in the pipeline is the lowest in decades, which will help stabilize the supply of office space in the coming years.

Overall, the DC area had positive traction through this quarter and is adjusting to the new patterns of tenants right-sizing and the lasting impacts of the work-from-home environment. Market conditions will continue to trend in a tenant-favorable direction for the foreseeable future as vacancy levels remain elevated and landlords compete to attract occupiers.

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