Q3 2023 Washington DC Market Report
The Washington area office market continues to face the challenge of increased vacancies, increased availability, and decreasing net absorption throughout the market. The nation’s capital, particularly the District of Columbia office market, is being negatively impacted by the hesitancy of government agencies to send workers back to the office. While shrinking the government’s office footprint has been in motion since before the outbreak of Covid-19, the pandemic has sped up the process. At the same time, new supply is limited with a slowdown in new office construction. The commercial real estate market sees an opportunity with weakening demand in the form of converting underutilized office spaces to alternative uses, such as retail, hospitality, and multi-family.
Meanwhile, landlords are in a difficult position as weakened demand and rising interest rates stall the office capital market landscape. Transaction flow is down from previous quarters accompanied by a decrease in the average lease size. Sublease space continues to increase with a total of 11.8 million square feet of sublease space throughout the greater metro area office market.
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