Strong absorption in 2018
Employment services job growth increased 0.2% in the District of Columbia during 2018, which is below the 10-year annual average of 1.3%. The District of Columbia office market per-formed well in 2018, with positive 700,000 SF of positive net absorption. Most tenants continue to demand new construction and trophy, leaving second-generation Class A space with elevated vacancy. However, as trophy asking rents drive rental rates higher, value tenants look to more affordable Class B space.
Asking rents rise 1.1% in 2018
The average asking rental rate for all classes of office space in the District of Columbia rose by 1.1% during 2018, increasing to $52.45 PSF from $51.87 PSF at year-end 2017.
The office prime average rent ended 2018 at $76.20 PSF. This is a slight decline from the $76.75 PSF rate we saw at year-end 2017.
Office investment modest
Office investment volume in the District of Columbia totaled $3.8 billion during 2018, accounting for 71% of the total real estate investment for all sectors during this period. This com- pares 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 4.4% at year-end 2018. Despite the challenging market conditions and political/government uncertainty, office received the bulk of the share of investment.