WASHINGTON, DC - Cassidy Turley, a leading commercial real estate services provider in the U.S., announced today that the Washington, DC metro area office market saw growth in non-farm employment levels and progress in federal leasing activity, as GSA prospectus leases were approved for the region in March. However, leasing activity slowed, due to continued rightsizing in the public and private sectors and BRAC-related move-outs.
The region’s employment level is approaching peak levels seen in 2008. According to the latest BLS payroll figures from January 2012, DC metro non-farm payrolls reached 3.011 million – the highest level seen since September 2008. Key office using sectors such as Professional & Business Services (PBS) and Financial Activities continued to deliver employment growth in the region. As of January 2012, PBS employment increased by over 2,000 payrolls during the past year and Financial Activities by over 1,800 payrolls. But regional federal sector payrolls were down by 1,400 compared to one year ago.
“DC metro leasing activity was negatively impacted this quarter, despite generally positive news regarding employment and the economy,” commented Jeffrey Kottmeier, Vice President, Director of Research with Cassidy Turley. “Until this quarter, BRAC-related moves had a relatively minor impact on the Northern Virginia market. Four move-outs weighed heavily on first quarter absorption figures contributing over 780,000 square feet of negative net absorption in Northern Virginia. Moving forward, the bulk of BRAC lease expirations will take place this year and in 2013, but it is still uncertain how many tenants will actually vacate space or renew in place,” he continued.
Government leasing activity is being affected by a number of different and sometimes unrelated initiatives, which include:
- BRAC-related moves, which were planned in 2005 and do not necessarily reflect current market conditions
- Lack of tenant movement due to uncertainties with austerity measures that may or may not take place in 2013
- Delayed prospectus approvals from Congress, coupled with more efficient space requirements
Washington, DC – Gross leasing activity remained stable - the bulk of activity occurred in the core submarkets of the East End and Central Business District with only a handful of transactions that represented net growth. Asking rents fell by 9 cents over the quarter from $49.39 in the fourth quarter to $49.30 per square foot on a full service basis. The American Bar Association signed the largest non-renewal lease this year for 61,000 square feet at 1050 Connecticut Avenue, NW.
Northern Virginia – Tenant demand slowed during the first quarter, down by almost 2/3 compared to the prior 10 year average. Uncertainty related to upcoming federal austerity measures is driving some of the slow-down; thus, activity will need to be closely monitored over the next few quarters. The average asking rent for office space continues to trend upward, increasing 16 cents over the quarter to $31.02 per square foot on a full service basis. The Center for Naval Analyses signed the largest non-renewal lease this year – a 181,000 square foot prelease at 3001 Washington Boulevard in the Clarendon/Courthouse submarket.
Maryland – Gross deal volume slowed in the first quarter, while the I-270 corridor captured the majority of leasing activity. Asking rents declined slightly from $29.00 per square foot in the fourth quarter of 2011 to $28.90 in the first quarter of 2012. The American Kidney Fund signed the largest non-renewal lease in 2012 for 26,000 square feet at 11921 Rockville Pike in Rockville, moving within the submarket and retracting by about 4,500 square feet.
Stay tuned for the release of Cassidy Turley’s 1Q 2012 DC Region Office Snapshots the first week of April.
About Cassidy Turley
Cassidy Turley is a leading commercial real estate services provider with more than 3,500 professionals in more than 60 offices nationwide. The company represents a wide range of clients –from small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $22 billion in 2011, manages 455 million square feet on behalf of institutional, corporate and private clients and supports more than 28,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. Cassidy Turley enhances its global service delivery outside of North America through a partnership with GVA, giving clients access to commercial real estate professionals across the globe. Please visit www.cassidyturley.com for more information about Cassidy Turley.