A Rebound in Occupancy
In the final quarter of 2024, the Washington DC office market saw a long-awaited reversal in its trend of occupancy losses. Vacancy rates dropped by 20 basis points (bps) to 22.5%, driven by two significant occupancy gains:
- The US Agency for Global Media relocated from federally-owned space in Southwest D.C. to leased space at 1875 Pennsylvania Avenue NW.
- Monumental Sports & Entertainment expanded by 120,000 sq. ft. at Gallery Place.
This quarter marked the first positive absorption since Q1 2022, signaling a potential stabilization in the market.
Leasing Hits a Three-Year High
Washington DC experienced a surge in leasing activity, with 8.0 million sq. ft. leased throughout 2024. The fourth quarter alone accounted for 2.2 million sq. ft., the highest quarterly volume in three years. Law firms were key players in this resurgence, making up 41% of Q4 lease volume.
Throughout the year, leasing trends reflected the city’s typical tenant mix:
- Government tenants led leasing volume.
- Law firms, business and financial services, and nonprofits followed closely.
Demand for High-Quality Space
Private sector tenants in Washington DC continued their “flight-to-quality” trend, favoring high-end buildings:
- Trophy and Class A+ buildings, which comprise just 23% of the city’s total inventory, captured 59% of private sector relocations since 2020.
- For relocations larger than 50,000 sq. ft., these premium buildings attracted 90% of the volume.
As demand for high-quality spaces persists and supply at the top end remains limited, market fundamentals for Trophy and Class A+ buildings are expected to strengthen.
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