Steady start to 2018
Employment services job growth increased 0.9% in the District of Columbia during the first half of 2018, which is below the 10-year annual average of 1.3%. The District of Columbia office market performed well during the first half, with positive 354,000 SF of positive net absorption. Most tenants continue to demand new construction and trophy, leaving second-generation Class A space wtih elevated vacancy. However, as trophy asking rents drive rental rates higher, value tenants look to more affordable Class B space.
Asking prime rents rise 0.5%
The average asking rental rate for all classes of office space in the District of Columbia increased 0.8% during the second quarter, up 0.8% over year-end 2017. The average asking rent was $52.26 PSF (full service) at June 2018. Office prime rents increased 0.5% to $77.17 PSF from year-end 2017.
Office investment modest
Office investment volume in the District of Columbia totaled $1.4 billion during the first half of 2018, accounting for 68% of the total real estate investment dollars for all sectors 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 4.5% at mid-year 2018. Despite the challenging market conditions and limited investment, office received the bulk of the share of investment dollars.