Strong absorption driven by pre-leased deliveries
Employment services job growth increased 0.9% in the District of Columbia during 2019, which is just below the 10-year annual average of 1.3%. The District of Columbia office market performed well in 2019, with 1.5 million SF of positive net absorption.
Most tenants continue to demand new construction and trophy, leaving second-generation Class A space with elevated vacancy. Strong absorption through the year was due primarily to the pre-leased delivery of 655 New York Avenue, NW and 150 M Street, NE..
Asking rents rise 0.5% in 2019
The average asking rental rate for all classes of office space in the District of Columbia increased 0.5% during 2019, increasing to $52.70 PSF from $52.45 PSF at year-end 2018.
The office prime average rent at year-end 2019 was $77.00 PSF. This is a 1.0% increase from the $76.20 PSF rate we saw at year-end 2018.
Office investment continues
Office investment volume in the District of Columbia totaled $2.9 billion during 2019, accounting for 80% 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.
Despite the challenging market conditions and political/government uncertainty, office received the bulk of the share of investment dollars.