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Market Report

Washington, D.C. Office Market Report

2Q 2023

Local Life Science Firms Expand, Counterbalancing the
Ongoing Shift to Smaller Floor Plans

Low office utilization weighs on space demand. New lease signings from Davis Polk, CACI International Inc., Halvik, Orrick, Atlantic Council and UBS Financial Services during the past two quarters ending in March continue to underscore the desire for an office presence in the Washington, D.C. metro. However, many of these firms and several federal government entities are signing new deals for smaller floor plans while vacating larger ones, entailing a reduction in their overall footprints. In March, Amazon also decided to halt construction on HQ2’s second phase, a sign that future office utilization remains unclear for both large and small tenants. These headwinds, coupled with the continued rise of sublet space hitting the market, pushed vacancy to an all-time high during the first quarter of 2023. The rate is projected to inch up further and eclipse the 20 percent threshold by year-end as economic uncertainty continues to negatively impact office space demand.

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