Employment and office market grow notably weaker
Employment services job growth decreased 6.6% in the District of Columbia, which is below the 10-year annual average of 0.4%. The office market showed notably weak demand during 2020, with negative 1.4 million SF of net absorption. This was due to tenants vacating or reducing space and heightened concerns of COVID-19 in the region causing tenants to pause lease decisions. There is some light at the end of the tunnel with the roll-out of a promising vaccine and a $900 billion stimulus relief bill, which will aid struggling Americans and businesses. Additional economic aid is expected to pass with less turbulence now that one party is in control of the White House and Congress. Despite this momentum, job growth will remain slow and uneven in the first few months of 2021, as jurisdictions battle rising COVID-19 cases until the vaccine is fully rolled out.
Asking rents rise 0.1% in all of 2020
The average asking rental rate for all classes of office space in the District of Columbia increased 0.1% during all of 2020, increasing to $52.77 PSF from $52.70 PSF at year-end 2019.
The office prime average rent at year-end 2020 was $78.55 PSF. This is a 2.0% increase from the $77.00 PSF rate at year-end 2019.
Slow office investment
Office investment volume in the District of Columbia totaled $788 million by year-end 2020, accounting for 63% of the total real estate investment dollars for all property types during this period. This compares to 79% of total investment dollars spent over the past five years. Office net prime yields have trended downward since reaching 7.0% in 2009 and now stand at 4.8% at year-end 2019. Given limited transactions there is no data to report during 2020.