1q11 washington dc office market report

8/6/2019 1Q11 Washington DC Office Market Report

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0

300,000

600,000

900,000

1,200,000

1,500,000

1Q10 2Q10 3Q10 4Q10 1Q11

Washington, D.C. Metro Area

Following a strong finish to 2010, in which 3.9 million square feet of net

absorption was recorded on the year, positive momentum in the

Washington, D.C. metro area office market continued t hat strength into

the first quarter of 2011 with 124,697 square feet of absorption. The first

quarter total marked the sixth consecutive quarter with positive

absorption in the market.

The vacancy rate in the metro area finished the quarter at 14.9%,

compared to 14.8% at the end of 2010 and maintained an improvement on

the 15.2% rate one year ago. Direct vacancy finished the quarter at 13.6%,

unchanged from one year ago, while sublet vacancy finished at 1.3%,

compared to 1.6% one year ago.

The average asking rent for office space in the Washington, D.C. metro

area finished the first quarter of 2011 at $35.82/sf, up from $35.74/sf at

the end of 2010 and from $35.57/sf one year ago. The asking rent for

direct space in the market averaged $36.32/sf at the end of the quarter,

compared to $36.24/sf one year ago, while sublet space averaged

$31.78/sf compared to $30.79/sf.

Total Inventory (SF) 320,819,295

Average Asking Rent (Price/SF) Total $35.82

Direct $36.32

Sublet $31.78

Vacancy Rate (%) Total 14.9%

Direct 13.6%

Sublet 1.3%

Net Absorption (SF) 1Q11 124,697

4Q10 1,085,230

3Q10 1,150,842

Under Construction (SF) 3,370,195

Table 1

Key Indicators

1Q10 1Q11 % Change

Vacancy Rate (%) 15.2% 14.9% -2.0%

Average Asking Rent (Price/SF) $35.57 $35.82 0.7%

Table 2

Year Over Year

Figure 1

Weighted Average Asking Rent & Vacancy

Figure 2

Net Absorption (SF)

Figure 3

Newmark Knight Frank ModernTrax™ Forecast

$35.00

$35.20

$35.40

$35.60

$35.80

$36.00

2Q10 3Q10 4Q10 1Q11 2Q11

Actual Rent (Price/SF) Forecasted Rent (Price/SF)

14.0%

14.4%

14.8%

15.2%

15.6%

16.0%

$35.00

$35.20

$35.40

$35.60

$35.80

$36.00

1Q10 2Q10 3Q10 4Q10 1Q11

Rent (Price/SF) Vacancy (%)

1Q11

Washington, D.C. Metro AreaOffice market

2



-600,000

-400,000

-200,000

0

200,000

400,000

1Q10 2Q10 3Q10 4Q10 1Q11

After finishing strong in 2010 with positive net absorption in the last three

quarters and a net total of 202,152 square feet of absorption on the year,

the Northern Virginia office market stumbled to start 2011, posting

negative 483,241 square feet of absorption in the first quarter. The

vacancy rate in the market reached 15.6%, the highest quarterly rate since

early 2004 and slightly above the 15.2% rate at the end of 2010 and the

15.2% rate one year ago. The average asking rent in the market increased

to $30.13/sf, up from $29.99/sf at the end of 2010 and $29.31/sf one

yearago.

The average asking rent for office space in the Tysons Corner submarket

climbed to $29.80/sf in the first quarter, up from $29.36/sf at the end of

2010 and $28.35/sf one year ago. The submarket vacancy rate finished

the quarter at 16.9%, an improvement on the 17.2% rate reported at the

end of 2010 and unchanged from the 16.9% rate reported one year ago.

The Tysons Corner submarket was one of the few submarkets in Northern

Virginia to post positive absorption in the quarter, at 70,157 square feet,

and was the third consecutive quarter with positive absorption in

the submarket.



Direct $30.63

Sublet $26.16


Direct 14.2%

Sublet 1.4%

Net Absorption (SF) 1Q11 -483,241

4Q10 193,881

3Q10 246,047

Under Construction (SF) 1,642,008

Table 1

Key Indicators

Table 2

Year Over Year

Figure 1


Figure 2

Net Absorption (SF)

Figure 3


$29.10

$29.40

$29.70

$30.00

$30.30

$30.60

2Q10 3Q10 4Q10 1Q11 2Q11


14.0%

14.4%

14.8%

15.2%

15.6%

16.0%

$28.80

$29.10

$29.40

$29.70

$30.00

$30.30

1Q10 2Q10 3Q10 4Q10 1Q11


Northern Virginia

4

1Q11


1Q10 1Q11 % Change

Vacancy Rate (%) 15.2% 15.6% 2.6%

Average Asking Rent (Price/SF) $29.31 $30.13 2.8%



-60,000

0

60,000

120,000

180,000

240,000

1Q10 2Q10 3Q10 4Q10 1Q11

After a solid performance in 2010, with 430,197 square feet of net

absorption recorded, the Maryland office market took a step back in the

first quarter of 2011 with negative absorption of 10,303 square feet. The

vacancy rate in Maryland office properties finished the quarter at 17.2%,

compared to 17.1% at the end of 2010 and 17.9% one year ago. Positive

rent gains were seen in the market as the average asking rent at the end

of the quarter was $27.18/sf, an increase over the $27.09/sf average at

the end of 2010, although still lower than the $27.29/sf average one

yearago.

Although the smallest submarket in the Maryland market, the Beltsville

and Calverton submarket posted the largest amount of positive net

absorption in the first quarter of 2011 at 73,420 square feet. This compares

to a net total of negative 98,444 square feet of absorption in all of 2010.

The average asking rent in the submarket finished the quarter at

$18.60/sf, down from $20.47/sf at the end of 2010 and $21.38/sf one year

ago, and was the lowest quarterly average since early 2000. The vacancy

rate in the submarket improved to 25.5%, compared to 30.4% at the end

of 2010 and 23.6% one year ago.



Direct $27.41

Sublet $24.72


Direct 16.0%

Sublet 1.2%

Net Absorption (SF) 1Q11 -10,303

4Q10 182,102

3Q10 81,302

Under Construction (SF) 629,975

Table 1

Key Indicators

Table 2

Year Over Year

Figure 1


Figure 2

Net Absorption (SF)

Figure 3


$26.80

$26.90

$27.00

$27.10

$27.20

$27.30

2Q10 3Q10 4Q10 1Q11 2Q11


16.5%

16.8%

17.1%

17.4%

17.7%

18.0%

$26.96

$27.04

$27.12

$27.20

$27.28

$27.36

1Q10 2Q10 3Q10 4Q10 1Q11


www.newmarkkf.com

Maryland

1Q10 1Q11 % Change

Vacancy Rate (%) 17.9% 17.2% -3.9%

Average Asking Rent (Price/SF) $27.29 $27.18 -0.4%



Address Submarket Square Feet Sale Price Price/SF

National Aeronautics and Space Administration 300 E Street SW Southwest 597,249

CoStar Group 1331 L St NW East End 169,429

Federal Housing Finance Agency 400 7th St SW Southwest 133,284

Mathematica Policy Research 1100 1st St NE NoMa 125,429

Time Warner 2551 Dulles View Dr Herndon 117,457

Tenant Address Submarket Square Feet

According to the U.S. Bureau of Labor Statistics, the unemployment rate

in the Washington, D.C. metropolitan area was 5.9% in February 2011, an

improvement on the 6.8% rate reported in February 2010. Total nonfarm

employment increased 2.5% in the 12 months ending in February 2011,

indicating an increase of 71,700 jobs, including 8,200 jobs gained in the

month of February alone. The Consumer Price Index for the area

increased 2.3% in the 12 months ending in January 2011.

The BLS also reported that for the U.S. overall, 1.2 million jobs were

gained in the 12 months ending in February 2011. The unemployment

rate for the U.S. overall was 8.9% at the end of February 2011, down from

9.0% in January 2011 and from the 9.7% rate reported in February of

2010. The CPI for the U.S. overall was up 2.2% over the last 12 months.

Figure 4

Total Nonfarm Employment, 12-Month % Change

Figure 5

Consumer Price Index, 12-Month % Change

Figure 6

Unemployment Rate

Table 3

Select Lease Transactions

Table 4

Select Sales Transactions

701-801 Pennsylvania Ave NW East End 679,710 $615,000,000 $905

1300 North 17th St Rosslyn 387,721 $200,000,000 $516

1101 K St NW East End 293,598 $200,000,000 $681

2300 N St NW West End 279,264 $140,000,000 $501

1255 23rd St NW West End 341,443 $137,400,000 $402

-1.3%

0.0%

1.3%

2.6%

3.9%

5.2%

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

United States Washington, D.C.

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

Feb-07 Feb-08 Feb-09 Feb-10 Feb-11


-4.5%

-3.0%

-1.5%

0.0%

1.5%

3.0%

Feb-07 Feb-08 Feb-09 Feb-10 Feb-11


6

1Q11




www.newmarkkf.com

Washington, D.C. 115,005,112 618,241 11.7% 1.3% 13.0% $50.70 $42.55 $49.70

Capitol Hill 4,171,092 90,608 12.7% 0.4% 13.1% $56.19 $60.16 $56.39

Capitol Riverfront 4,490,151 -14,710 11.7% 0.1% 11.8% $47.44 $45.00 $47.40

CBD 33,853,595 -127,189 10.5% 1.7% 12.2% $49.87 $44.03 $49.00

East End 39,867,666 131,888 9.4% 1.5% 10.9% $55.43 $41.69 $53.32

Georgetown 2,564,674 -13,704 11.4% 2.2% 13.6% $44.01 $36.47 $42.79

NoMa 8,921,665 226,108 18.7% 0.2% 18.9% $47.37 $44.12 $47.33

Southwest 11,505,941 258,263 16.8% 0.1% 17.0% $51.96 $49.94 $51.94Uptown 6,157,864 49,901 9.4% 2.9% 12.3% $36.25 $39.13 $36.81

West End 3,472,464 17,076 17.8% 1.6% 19.4% $41.93 $39.39 $41.53

Northern Virginia 150,558,912 -483,241 14.2% 1.4% 15.6% $30.63 $26.16 $30.13

Alexandria 11,932,305 -22,788 12.8% 0.8% 13.6% $31.05 $26.37 $29.91

Annandale 1,445,202 -17,268 17.8% 1.6% 19.4% $24.46 $21.29 $24.19

Ballston 6,513,632 -62,481 5.4% 2.7% 8.1% $42.78 $36.18 $41.95

Chantilly 11,553,626 168,776 15.1% 1.1% 16.2% $26.41 $18.12 $25.67

Clarendon/Court House 4,856,770 -139,490 17.1% 3.2% 20.3% $41.25 $37.35 $40.33

Crystal City 11,902,590 -2,026 8.1% 0.7% 8.8% $40.78 $32.83 $40.28

Herndon 11,190,169 114,129 15.7% 1.0% 16.8% $29.06 $17.13 $28.52

Fairfax 10,167,592 114,760 14.2% 1.3% 15.5% $25.88 $22.41 $25.49

Falls Church 2,057,751 16,826 8.6% 0.4% 9.0% $24.06 $20.97 $23.86

Merrifield 7,320,777 95,422 15.7% 1.8% 17.5% $32.66 $21.64 $31.91

Oakton 1,027,897 -3,072 24.3% 3.4% 27.6% $27.24 $22.54 $26.78

Old Town Alexandria 6,669,351 -72,300 14.0% 1.0% 15.0% $33.28 $28.96 $32.89

Reston 16,144,558 -446,788 20.5% 2.4% 22.9% $27.20 $25.41 $26.87

Rosslyn 8,445,227 -340,436 8.5% 1.1% 9.6% $42.55 $32.94 $40.49

Route 28 North 7,498,217 -87,228 18.3% 0.7% 18.9% $23.69 $20.79 $23.52

Springfield 4,467,292 125,855 11.7% 0.3% 12.1% $29.44 $27.81 $29.41

Tysons Corner 26,028,481 70,157 15.3% 1.6% 16.9% $30.32 $25.84 $29.80

Virginia Square 1,337,475 4,711 2.2% 0.0% 2.2% $43.24 NA $43.24Maryland 55,255,271 -10,303 16.0% 1.2% 17.2% $27.41 $24.72 $27.18

Beltsville & Calverton 1,484,817 73,420 25.5% 0.0% 25.5% $20.65 $10.50 $18.60

Bethesda & Chevy Chase 9,352,274 342 8.1% 2.3% 10.3% $35.31 $30.63 $34.49

Gaithersburg & Germantown 6,313,283 3,078 17.7% 0.9% 18.6% $23.69 $22.51 $23.63

Greenbelt 3,193,839 30,548 24.0% 0.1% 24.2% $20.41 $18.33 $20.31

Landover & Lanham 4,262,794 12,597 23.4% 0.6% 24.0% $20.15 $15.62 $20.04

N. Bethesda & Potomac 8,188,415 -31,569 16.6% 0.7% 17.3% $30.88 $25.35 $30.32

Rockville 17,527,392 -114,709 16.4% 1.4% 17.9% $29.62 $23.22 $29.17

Silver Spring 4,932,457 15,990 11.5% 1.2% 12.7% $30.04 $29.92 $30.02

D.C. Metro Area 320,819,295 124,697 13.6% 1.3% 14.9% $36.32 $31.78 $35.82

Table 5

Submarket Statistics

Total Qtrly Net Direct Sublet Total Direct Avg. Sublet Avg. Total Avg.

Inventory Absorption Vacancy Vacancy Vacancy Asking Rent Asking Rent Asking Rent

(SF) (SF) Rate Rate Rate (Price/SF) (Price/SF) (Price/SF)



RESEARCH

Paul Frischer

Executive Managing Director

212.372.2368

[email protected]

Matt Maison

Director, Research

212.372.2099

[email protected]

Chris Hanaway

Senior Research Analyst

212.372.2096

[email protected]

Peter Hur

Research Analyst

David Chase

Research Analyst

Dan Appel

Research Analyst

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1q11 washington dc office market report

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