Washington, D.C., Office Investment Forecast
Diverse Tenant Base Fuels Buyer Confidence in D.C. as Inflated Vacancy and Space Recalibrations Persist
Flight-to-quality ushers in the return of positive absorption. Comparable to other primary office markets, Washington, D.C., enters 2022 with a historically high vacancy rate and a recovery timeline whose duration is clouded by the emergence of COVID variants and major tenants' future space requirements. Still, private companies are displaying a desire to relocate to higher-quality footprints within the metro or establish a presence in the market while asking rent growth remains nominal. Leasing activity from the second half of last year reflects this movement as absorption returned to positive territory for the first time since early 2020. Commitments for Class A space have been most frequent with tenants exhibiting a preference for suburban Virginia. Similar leasing velocity in 2022 has the potential to offset actions taken by government agencies, which are expected to lean on hybrid work schedules for longer durations and potentially reduce lease obligations with private owners. Still, vacancy is unlikely to compress in the near term and the metro is expected to end this year with the East Coast's highest office availability.