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Market Report

Washington, DC | 2nd Quarter 2015

Contents

DC Metropolitan Area Overview.....................................................................................................3


Washington, DC & Map...............................................................................................................4-6
East End............................................................... ..................................................................................7
CBD.............................................................. ...........................................................................................8
West End/Georgetown.....................................................................................................................9
Capitol Hill/NoMa...........................................................................................................................10

Southwest/Capitol Riverfront/Southeast.................................................................................11
Uptown......................................................................................................................................................12
Appendix...................................................................................................................................................13
Tables..................................................................................................................................................13-22
Methodology & Definitions..................................................................................................................23
About DTZ...............................................................................................................................................24

DTZ | 2

Washington, DC Metropolitan Area


DC Metro Region Rises off the Bottom
After a lackluster performance in 2014, by midyear 2015 it was clear

WASHINGTON, DC METRO

Economic Indicators

that the DC Metro economy is back on track. Job growth in 2014 was

Q2 14

Q2 15

below average with just over 19,000 new nonfarm payroll jobs for the

DC Metro Employment

3.11M

3.18M

year; in fact the DC Metro Region was last among major metropolitan

DC Metro Unemployment

5.0%

4.6%

regions in job growth in 2014. Compare that to June 2015: over-the-year

U.S. Unemployment

6.1%

5.3%

Q2 14

Q2 15

Overall Vacancy

15.6%

16.1%

Net Absorption

154K

666K

Under Construction

3.9M

5.8M

Deliveries

2.1K

567K

$35.91

$35.29

12-Month
Forecast

employment in the region was 64,000 net new jobs well above the
the return of office-using job growth to the region. Overall office-using
employment (including federal government employment) in the DC
Region shrank by 12,000 jobs in 2014. At midyear 2015, office-using
employment had turned positive, driven by a surge of over 20,000 jobs
in the high- paying Professional and Business Services sector since June
of 2014. A closer examination of that very important sector shows that
consulting has been leading the way in employment growth, adding 9,500
jobs from since June 2014, administrative jobs adding 8,100 positions
and an even a modest growth in executive level management and legal
services in the region.

Market Indicators

Average Asking Rent (FS)

12-Month
Forecast

Net Absorption/Asking Rent


4Q TRAILING AVERAGE
2.0

$36.50

Major regional demand drivers are at an inflection point. After being a


drag on the local economy for the last four years, the Federal Government
has reached stabilization both in terms of spending and employment. The

$36.00
1.0

$35.50

federal contracting community that is an integral part of the suburban


office landscape is estimated to be about 65% of the way through its
round of downsizing. Finally, about 80% of law firms that account for a

$35.00
0.0

$34.50
$34.00

third of the District of Columbias downtown core market footprint have


transacted deals. While these law firms as a whole have reduced size

-1.0

requirements and returned 1.2 million square feet to the market from

2010

2011

bottom in 2014 and is now poised for positive, if modest, conditions

2015

$33.50

Asking Rent, $ PSF

NET ABSORPTION - DELIVERIES - VACANCY

10

importantly, the decrease in regional vacancy signals a reversal from

15 straight quarters of flat or rising vacancy. The downtick in vacancy

coincides with overall positive absorption of 670,000 sf for the second

MSF

12

at 16.1%, a 0.1% decrease from its level in the first quarter of 2015. More

16%
12%
8%

a backdrop, investment in the region continues unabated. As of midyear

2015, $4 billion in transaction volume had occurred in the office sector

-2

signaling another robust year for investors bullish on prospects for the

-4

future of the DC Region.

2014

Washington, DC Metropolitan Area

moving forward in the near term. The vacancy rate for the region stands

quarter, bringing the midyear absorption total to 390,000 sf. With this as

2013

Net Absorption, MSF

2011-2014, the impact of any future downsizing will be far less dramatic.
In retrospect, it appears that the DC Metro regions office market hit

2012

Vacancy Rate

historical average of 35,000 jobs per year. Adding to the good news is

4%

05

06

07

08

Net Absorption

09

10

11

Deliveries

12

13

14

Vacancy Rate

YTD
15

0%

www.dtz.com | 3

Washington, DC
It is clear that after a lackluster year in 2014, the Washington, DC
Metropolitan Regions economy has returned to above average
conditions. The DC Metro continues to register one of the lowest
unemployment rates among major metros in the United States4.6%.
Since May of 2014, the region has added 59,000 non-farm payroll jobs,
15,400 of them in the office-using sectors of Professional and Business
Services, Information, Financial Activities, and Federal Government. This
is quite impressive considering about 35,000 net new jobs are added in
a typical year and in 2014, the region lost approximately 12,000 officeusing jobs. In the District of Columbia (DC), the unemployment rate
dropped 40 basis points from 7.7% in January 2015 to 7.3% in May of this
year while nonfarm job growth is up over 13,000 jobs compared to a year
ago. The Federal Government, which accounts for over 25% of nonfarm
payrolls in DC, has continued to stabilize after four years of contraction,
adding 1,400 jobs from May 2014 to May 2015 while Professional and
Business Services employment is up nearly 5,000 jobs.

Market Overview
After a modest start to the year, the District of Columbia experienced
strong positive demand in the second quarter of 2015, driven by the
two core downtown submarkets: the Central Business District (CBD)
and East End. In fact, these two submarkets captured 69% of the
demand across Washington DC during the quarter. The CBD boasted
the strongest demand with 125,400 sf of positive absorption, while the
East End registered 64,300 sf. The divergence of the East End and CBD
that began in the first quarter of the year seemed to take a halt during
the second quarter. The majority of deals signedboth new deals and
relocationswere for space in the same submarkets where tenants
leases were previously.
After three straight quarters of rising vacancy, the District of
Columbias vacancy rate ticked downward 30 basis points to 11.0%.
Vacancy in the CBD dropped below 10% for the first time since the
end of 2008. Leasing activity in the second quarter was dominated
by larger deals in new construction or renovated buildings. Kirkland
& Ellis signed a prelease for 186,000 sf at 1301 Pennsylvania Avenue,
NW in the East End. As is the case with several other large law firms,
Kirkland & Ellis will downsize by more than 60,000 sf upon delivery of
the Pennsylvania Avenue building in 2018. Another large lease in new
construction was that signed by Bracewell Giuliani at 2001 M Street,
NW currently undergoing a complete renovation. Following on the
heels of its successful renovation of 799 9th Street which delivered
in 2014 leased to two major law firms, Brookfields 2001 M Street,
NW, has seen the most interest among all other major renovations
throughout the District of Columbia. It is expected to deliver in 2016.
Office buildings that are currently under construction are over 60%
leased in the District of Columbia.
GSA activity was relatively light throughout the first half of the year,
but is expected to pick up in the near future. A staggering 13 million
square feet of federal leases are set to expire through 2019 in the
District of Columbia and owners that can deliver large blocks of space
that fit federal lease requirements are set to benefit. This activity could
only have modest impacts on the overall vacancy rate in the District
as most large prospectus level leases in the queue at this time are
targeting space efficiencies in the 10 20% range with one for the
Department of Education targeting a 42% space reduction.

Market Indicators
Q2 14

Q2 15

Overall Vacancy

11.2%

11.0%

Net Absorption

(321K)

275K

1.5M

3.1M

Under Construction
Deliveries
Average Asking Rent

12-Month
Forecast

274K

$50.35

$50.12

Gross Leasing Activity


District of Columbia, Square Feet per Year
14
12
10
Millions

Economy

10.1
8.7

7.6

11.7

10.5

9.6

9.6

8.5

10.7

10.1
8.4

7.8

8.4

7.7

6.6

4.5

4
2
0

00

01

02

03

04

05

06

07

08

CBD
West End/Georgetown
Southwest/Southeast

09

10

11

12

13

14

Q2
15

East End
Capitol Hill/NoMa
Uptown

Overall Vacancy Rate


12.0%
11.5%
11.0%

Historical Average = 10.7%

10.5%
10.0%
9.5%
9.0%

2010

2011

2012

2013

2014

2015

Large Blocks of Contiguous Space


Uptown
Southwest/
Southeast
Capitol Hill/
NoMa

25k to 50k
50k to 100k
100k to 150k
150k to 200k
200k +

West End/
Georgetown
East End
CBD
0

10

20

30

40
50
# of Blocks

60

70

80

DTZ | 4

Washington, DC Submarkets
Submarkets
UPTOWN

WEST END/
GEORGETOWN

50

CBD

EAST END

NOMA

29

CAPITOL HILL
66

50

395

DI

ST
R

395

IC

SOUTHWEST

TO

VIR F
GI CO
L
NI
A UM

BI
A

395

395

CAPITOL RIVERFRONT/
SOUTHWEST
295

www.dtz.com | 5

Top Transactions
Key Lease Transactions 2Q 15
PROPERTY

SF

TENANT

TRANSACTION TYPE

SUBMARKET

1301 Pennsylvania Avenue, NW

186,000

Kirkland & Ellis

Prelease

East End

1111 19th Street, NW

70,482

Undisclosed Tenant

New

CBD

1299 Pennsylvania Avenue, NW

56,500

APCO

New

East End

2001 M Street, NW

55,000

Bracewell Giuliani

New

CBD

2450 N Street, NW

43,100

Cogent Communications

New

West End

1001 G Street, NW

42,844

Quadrangle Development Corp.

Renewal

East End

955 L'Enfant Plaza, SW

34,000

Veracity Engineering

New

Southwest

900 G Street, NW

33,216

American Legacy Foundation

New

East End

Key Sales Transactions 2Q 15


SF

SELLER/BUYER

PRICE

SUBMARKET

1101 K Street, NW

291,500

Rockefeller JV Mitsubishi / UBS Realty

$260,000,000

East End

1325 and 1341 G Street, NW

431,600

TIER REIT / Westbrook Partners

$200,000,000

East End

1750 K Street, NW

165,800

Sumitomo Corporation / Mirae Asset Global Management

$115,000,000

CBD

645 H Street, NE

84,700

Jair Lynch / Intercontinental Real Estate

$51,400,000

Capitol Hill

1140 19th Street, NW

71,100

AREP / Rockrose

$40,500,000

CBD

Washington, DC Office Market

Washington, DC Office Market

Net Absorption - Deliveries - Vacancy, Second Quarter 2015


7

16%
12%
8%

4%

45

15%

40

14%

35

13%
12%

30

11%

25
MSF

Vacancy Rate

5
MSF

Inventory by Class, Second Quarter 2015

10%

20

9%

15

8%

10

7%

-1

05

06

07

08

Net Absorption

09

10

11

Deliveries

12

13

14

Vacancy Rate

YTD
15

0%

Vacancy Rate

PROPERTY

6%
CBD

East End

Class A

Class B

West End/ Capitol Hill/


Georgetown
NoMa

Class C

Southwest/
Southeast

Vacancy %

Uptown

5%

DC Overall Vacancy

DTZ | 6

East End
Net Absorption

Under Construction

64,365 SF

932,300 SF

After a dismal first quarter of 2015, the East End experienced positive
demand and stronger leasing conditions throughout the second quarter.
The submarket registered nearly 65,000 sf of net absorption and its
vacancy rate declined slightly to 11.5%. The most demand was for Class
B product with 120,000 sf of positive absorption, while Class A space
actually posted negative absorption of 56,200 sf. Asking rents continued
to diverge between Class A and B product and may now be affecting
tenant preferences. The East End has traditionally been the main focus
for DCs most credit worthy tenants as it was developed later; offering
generally newer product than the Central Business District (CBD) and
its proximity to both the Capitol and the White House is unparalleled
throughout the District of Columbia. But over the past year or so the
consistent trend has been tenants moving towards the CBD and into new
or renovated product.
Although the submarket saw improvement during the second quarter,
a further spike in vacancy may be in the cards as the availability rate is
currently hovering at 21%. The spread is the widest among all submarkets
in the District of Columbia and, with an inventory of nearly 40 million
square feet, has led to a city-wide vacancy rate that is well above the
historical average of 9%.
As has been the case over the last two years, new construction
outperformed the rest of the market, registering 35,500 sf of absorption
in the second quarter and accounted for over 50% of demand. The only
delivery in the District through the first half of 2015, 900 G Street, NW,
continued to see increased activity with the American Legacy Foundation
signing for nearly 33,200 sf. Other large deals across the submarket
were Kirkland & Ellis signing a 130,000 sf prelease at 1301 Pennsylvania
Avenue, NW, and APCO signing for 56,500 sf at 1299 Pennsylvania
Avenue, NW.

Asking Rent

Deliveries

$54.51 FS

0 SF

Net Absorption Deliveries Vacancy


2.0

16%

1.5

12%

1.0
0.5

8%

0.0

4%

-0.5
-1.0

05

06

07

08

09

Net Absorption

10

11

Deliveries

12

13

14

Vacancy Rate

YTD
2015

Vacancy Rate

Vacancy
11.5%

MSF

*Arrows = Current Qtr Trend

0%

Vacant and Available Space


9
8
7
6
MSF

Market Indicators

5
4

1.5

2.6

3.7

4.1

3.5

Q4 11

Q4 12

Q4 13

1.9

1.5

3.6

Q4 10

4.3

3.8

4.2

4.6

Q4 14

Q2 15

3
2
1
0

Vacant

Marketed Available (not yet vacant)

Outlook

Many large blocks of space came back to market in the


East End in 2014, primarily the result of the GSA and major
law firms increasing space efficiency. While this trend is
not completely over, it appears the majority of planned
consolidations have already taken place. As the East End
has historically accounted for much of the District of
Columbias leasing activity, look for conditions to level out
in 2015 as expansion returns to the submarket.
Looking ahead, the East End will rely increasingly on
private sector growth to fuel demand as the submarket is
becoming too pricey for federal tenants.
While asking rents increased year-over-year in the East
End, much of the increase can be attributed to new trophy
product delivering to the market. With market conditions
still leaning toward tenants favor, effective rents will likely
remain flat into 2016.

Asking Rent
$65
$60
Full Service PSF

$55
$50
$45
$40
$35

2009

2010

2011
Class A

2012

2013

2014

2015

Class B, $ PSF

www.dtz.com | 7

Central Business District


Net Absorption

Under Construction

Deliveries

Asking Rent

125,400 SF

541,000 SF

0 SF

$50.67 FS

The Central Business District (CBD) registered another very strong


quarter in 2015. Net absorption for the second quarter was 125,400
sf, bringing the midyear total to 345,000 sf. Vacancy continued to
decline, from 10.2% at the end of the first quarter to 9.9% to close out
the secondthe first time vacancy has been below 10% since 2008.
The CBDs availability rate and its spread from the vacancy rate are not
nearly as pronounced as it is in the East End. Currently the availability
rate is 14.2%; only a 4.3% spread which is among the smaller spreads
across the entire District of Columbia market. Analyzing the two rates
further, the CBD should continue to become more competitive as only
five blocks of space are available over 100,000 sf.
The future continues to look very bright for the submarket with the
existing development pipeline exceptionally well pre-leased. 900
16th Street, NW and 905 16th Street, NW are both more than 70%
preleased and are expected to deliver at the beginning of 2016. Kicking
off the leasing at Brookfields project, 2001 M Street, NW, Bracewell
Giuliani signed for nearly 50,000 sf in the second quarter of the
year. Although the building is currently only 19% leased with nearly
8 months until delivery, activity in the CBD has proven that newly
renovated buildings outperform the rest of the market. For instance,
Clarion Partners building at 1111 19th Street, NW has continued on
its path towards a full lease-up with a new lease signed for 70,500
sf in the second quarter by an undisclosed tenant. After some major
renovations to its lobby and faade, the building has gone from 55%
leased to nearly 90% leased within one year.

Net Absorption Deliveries Vacancy


14.0%
14.0%
12.0%
1.25
12.0%
1.00
10.0%
1.00
10.0%
0.75
8.0%
0.75
0.50
8.0%
6.0%
0.50
0.25
6.0%
0.25
4.0%
0.00
4.0%
0.00
2.0%
-0.25
2.0%
-0.25
-0.50
0.0%
-0.50
0.0%
05 06 07 08 09 10 11 12 13 14 YTD
05 06 07 08 09 10 11 12 13 14 YTD2015
Net Absorption
Deliveries
Vacancy
2015 Rate
Net Absorption
Deliveries
Vacancy Rate
1.50

1.50
1.25

MSF

Vacancy
9.9%

Vacant and Available Space


8
7
6

1.9

1.9

5
MSF

*Arrows = Current Qtr Trend

MSF

Market Indicators

The top-quality properties in the CBD have outperformed other


properties in the submarket during the second quarter 2015, accounting
for 136,999 sf of quarterly absorption. The Class B division of the
CBD has been more competitive and boasts only 9.4% vacancy and
13.1% availability while Class A properties have a 10.4% vacancy and
15.1% availability. Considering the submarkets current momentum,
combined with a scarcity of large blocks of space on the horizon,
expect concessions to stabilize and dial back, leading to modest asking
rent growth and a market that leans in the landlords favor.

1.6

1.7

2.0

4
3
2

1.7

4.8

4.8

4.8

4.6

4.2

3.8

Q4 10

Q4 11

Q4 12

Q4 13

Q4 14

Q2 15

1
0

Vacant

Marketed Available (not yet vacant)

Asking Rent
$65
$60

With vacancy continuing to decline in the CBD, the


submarket may be one of the first in the District of
Columbia to begin to see a shift from a tenants market to
a landlords market.
The pipeline of properties under construction or renovation
in the CBD is only 34% preleased. However, it includes
Brookfield Office Properties speculative project at 2001
M Street, NW. The property recently signed its first core
tenant and will likely gain momentum moving forward.

Full Service PSF

Outlook

$55
$50
$45
$40
$35

2009

2010

2011
Class A

2012

2013

2014

2015

Class B, $ PSF

DTZ | 8

West End/Georgetown
Net Absorption

Under Construction

Deliveries

Asking Rent

28,700 SF

0 SF

0 SF

$47.82 FS

West End/Georgetown saw a strong start to the year in the first quarter
of 2015one of the few positive quarters of demand in the submarket
over the last ten years. But demand remained flat throughout the
second quarter of 2015, registering only 3,200 sf of absorption. The
West End, largely composed of smaller office product, is vulnerable
to large-scale move-outs driving vacancy rates upward. After a spike
in vacancy in 2014, from 5.7% to 12.4%, the rate ticked back down
by 0.5 percentage points down to 11.9% year-to date. Fortunately, the
availability rate has declined consistently over the last three quarters,
a solid sign that the submarket may have already endured the worst.
Typically the West End is dominated by smaller sized leases with
fewer large blocks being marketed as available. Surprisingly, the fifth
largest lease transaction in the second quarter for the entire District of
Columbia was that of Cogent Communications which signed a new deal
at 2450 N Street, NW. Previously owner-occupied by the Association
of American Medical Colleges, Cogent was the first private-sector
lease to be signed as it took nearly half of the 88,000 sf building.
The development pipeline continues to be bleak for the near future
with no projects currently under construction and very little proposed
looking out to 2018. Any development in the near term will likely be
redevelopment of existing assets, possibly to other uses as will likely be
the case with The Salvation Army Capitol Region headquarters at 2626
Pennsylvania Avenue, NW. This will continue to drive the demand in
the land constrained submarket, likely resulting in a drop in the vacancy
rate over the near term.

Net Absorption Deliveries Vacancy


300

16%

200
100

12%

0
-100

8%

-200
-300

4%

-400

Vacancy Rate

Vacancy
11.9%

Square Feet, 000s

*Arrows = Current Qtr Trend

-500
-600

05

06

07

08

09

Net Absorption

10

11

Deliveries

12

13

14 YTD
2015

0%

Vacancy Rate

Vacant and Available Space


1.2
1
0.4

0.8
MSF

Market Indicators

0.2

0.4

0.1

0.6

0.6
0.4

0.7

0.6

0.6

0.2
0

0.1

0.7

0.7

Q4 14

Q2 15

0.3
Q4 10

Q4 11
Vacant

Q4 12

Q4 13

Marketed Available (not yet vacant)

Asking Rent
$52

With the huge uptick in vacancy over the past year, expect
fierce competition for a limited number of tenants in 2015
as concession packages continue to reach record levels.

It remains to be seen whether some of the large blocks of


available space in West End/Georgetown will ever be released. One solution to the vacancy issue will likely be the
conversion of some older office buildings to residential or
other uses. 2501 M Street, NW may have started the trend
and others, such as a rumored sale and redevelopment
of the Salvation Army headquarters building at 2626
Pennsylvania Avenue, are likely to follow.

$50
Full Service PSF

Outlook

$48
$46
$44
$42
$40
$38

2009

2010

2011
Class A

2012

2013

2014

2015

Class B, $ PSF

www.dtz.com | 9

Capitol Hill/NoMa
Net Absorption

Under Construction

Deliveries

Asking Rent

85,500 SF

1,166,900 SF

0 SF

$50.68 FS

On its own, NoMa has experienced high vacancy rates recently due to
a number of large speculative projects that have been developed in the
submarket. Over the last three years, both Sentinel Square and Three
Constitution Square have delivered fully vacant on a speculative basis,
and that has caused vacancy to spike. But as the market continues
to experience government agency right-sizing, these buildings may
become less expensive alternatives for the GSA than space in the
CBD and East End. Another speculative building currently under
construction is 660 North Capitol Street, also known as Republic
Square II. The property signed its first two tenants, the National League
of Cities and the National Association of Counties, which together will
be taking roughly 81,000 sfnearly half the building. Another positive
development: the availability rate in NoMa is currently 15.6%, a solid
sign for the submarket as the spread between availability and vacancy
is the smallest among major submarkets in the District of Columbia.
There is little room for the vacancy rate to increase and so the worst
may be over. Expect the spec properties to garner more attention from
government tenants and NoMa to see a drop in vacancy in the near
future.
A notable project that broke ground in the second quarter was
Capital Crossing, backed by Property Group Partners. The project
aims to connect the East End with Capitol Hill/NoMa while building
a platform over I-395. There will be nearly one million sf developed
over the course of the landmark project, adding a new aspect to the
District of Columbia market. Property Group Partners goal is to create
a new vibrant neighborhood with 63,000 sf of retail, restaurants and
amenities to complement the office and residential portions of the
project. A truly groundbreaking project, Capitol Crossing will bring a
new excitement to Capitol Hill/NoMa when the project is completed
in 2018.

Outlook

Although Capitol Hill/NoMa has several large blocks of


space available, including two fully vacant buildings that
delivered at the end of 2013, most of the available blocks
are already vacant, so vacancy is expected to remain flat
to declining into 2015.
While a play for GSA seems to be a no brainer for a NoMA
submarket that can offer a new, highly efficient floorplate
under the $50 prospectus rent cap in the District, there has
also been rumored to be large private sector technology
firms in play.

Net Absorption Deliveries Vacancy


1.50

16%

1.25
12%

1.00
0.75

8%

0.50
0.25

Vacancy Rate

The Capitol Hill/NoMa submarket has continued to be one of the


most active submarkets in the District of Columbia. Widely considered
one of the up and coming areas of DC with increased development
activity among all product types, the NoMa office submarket
experienced strong demand with net absorption of 42,000 sf during
the second quarter of 2015. As a result, NoMas vacancy rate declined
0.4 percentage points to 13.9%. Capitol Hill accounted for 68,000
sf of absorption from January through June, and boasted the lowest
vacancy rate among all submarkets at 9.4%. Due to its prime location
with proximity to the Capitol, Capitol Hill has maintained its place as the
most competitive submarket that demands the highest asking rents of
$56.88 psf, well above the $54.38 psf asking rents in the East End. The
combined submarkets strong leasing demand has driven the vacancy
rate down 0.5 percentage points to 12.5% at the half year mark.

MSF

Vacancy
12.5%

4%

0.00
-0.25

05

06

07

08

09

Net Absorption

10

11

Deliveries

12

13

14 YTD
2015
Vacancy Rate

0%

Vacant and Available Space


3.0
2.5
2.0
MSF

*Arrows = Current Qtr Trend

0.6

1.7

0.5
0.0

Q4 10

1.2

1.2

Q4 11

Q4 12

Vacant

0.6

0.4

0.5

2.0

1.9

1.9

Q4 13

Q4 14

Q2 15

0.9

0.6

1.5
1.0

Marketed Available (not yet vacant)

Asking Rent
$55
$50
Full Service PSF

Market Indicators

$45
$40
$35
$30
$25

2009

2010

2011
Class A

2012

2013

2014

2015

Class B, $ PSF

DTZ | 10

Southwest/Capitol Riverfront/Southeast
Net Absorption

Under Construction

Deliveries

Asking Rent

35,000 SF

553,900 SF

0 SF

$45.08 FS

The Southwest/Capitol Riverfront/Southeast submarkets have


consistently performed exceptionally well over the last two years.
It is often viewed as one of the major submarkets gaining the most
momentum in the District of Columbia. After a spectacular 2014,
both Southwest and the Capitol Riverfront have proved worthy of the
momentum, bringing in positive midyear absorption of 45,000 sf and
57,400 sf, respectively. The entire submarkets vacancy rate declined
0.2 percentage points to 10% with rates that hover around $43.00 psf.
With average asking rates well below $50.00 psf, it is federal
government tenants driving the market activity by Nationals Stadium.
The first quarter of 2015 was particularly active for GSA throughout
the submarket. There were deals signed at 250 E Street, SW, 425 3rd
Street, SW and 375 E Street, SW, all for over 50,000 sf. GSA activity in
the second quarter slowed, not only in SW/Capitol Riverfront/SE but
across the District of Columbia as a whole. Bucking the trend of GSA
efficiency, the National Labor Relations Board actually expanded its
footprint by nearly 10,000 sf at 1015 Half Street, SE during the second
quarter, an indication that perhaps it may have been too aggressive in
the attempt to maximize space efficiency.
Among private sector tenants, the American Psychiatric Association
(APA) signed the first lease at 800 Maine Avenue, SW. The project,
known as the first phase of the mixed-use Wharf development, has
brought added excitement to the Southwest submarket. APA will
take nearly 70,000 sf, or a third of the building, upon delivery in 2017.
After another major lease transacts at the Wharf, expect 1000 Maine
Avenue, SW to break ground shortly thereafter. The only other project
under construction in the submarket is 400 6th Street, SW (also known
as 500 D Street, SW). The property, developed by Trammell Crow,
is expected to be finished by the end of the third quarter of this year
and will supply 341,300 sf to the submarket. Currently the project is
unleased but is expected to be very competitive for an unprecedented
amount of government deals hitting the market in the near future.

Net Absorption Deliveries Vacancy


3

24%
20%

16%

12%
8%

Vacancy Rate

Vacancy
10.0%

MSF

*Arrows = Current Qtr Trend

4%

-1

05

06

07

08

09

Net Absorption

10

11

Deliveries

12

13

14

Vacancy Rate

YTD
2015

0%

Vacant and Available Space


3.0
2.5
2.0
MSF

Market Indicators

1.5

0.0

0.1

0.6

0.9

2.0

1.8

1.7

Q4 13

Q4 14

Q2 15

0.5

1.0
0.5

0.6

0.7

1.6

1.8

Q4 11

Q4 12

1.3

Q4 10

Vacant

Marketed Available (not yet vacant)

Asking Rent

Outlook

With 70,000 sf preleased out of 550,000 sf under


construction in Southwest, rising vacancy is a definite
possibility.
The National Association of Broadcasters will be moving
to a build to suit office building at 1 M Street, SE in the
Capitol Riverfront neighborhood. The building will break
ground in spring of 2016 and bring 130,000 sf of office
space to the submarket by 2018. With its ever-expanding
amenity base, the Capitol Riverfront is rapidly becoming
the citys full-service entertainment district.

Full Service PSF

$55
$50
$45
$40
$35

2009

2010

2011
Class A

2012

2013

2014

2015

Class B, $ PSF

www.dtz.com | 11

Uptown
Net Absorption

Under Construction

(38,400) SF

0 SF

Uptown has experienced a sustained lack of demand since the


beginning of the last recession and so has suffered from a severe spike
in vacancy. In 2007, the vacancy rate hovered around 5%; vacancy is
currently at 14.1%. Uptown also has the second highest availability
rate among major Washington, DC submarkets: 19.0%. Net demand
over the last 8 years has averaged nearly -75,000 sf per year and has
totaled -655,000 sf. While this may not tell the greatest story, a few
large-scale move-outs have significantly impacted the area given its
relatively small inventory. With only 6.6 million square feet in the
submarket, Intelsats move from 4000 Connecticut Avenue, NW to
the suburbs played a large role in the vacancy spike as it gave back
nearly 355,000 sf.
Unlike in many of the past quarters, the Uptown submarket experienced
one of its first lease transactions over 10,000 sf during the second
quarter of 2015. Metalogix, a software provider focused on Microsoft
products such as Office 365, Exchange and Sharepoint, signed for
17,000 sf in the Chevy Chase Pavilion at 5335 Wisconsin Avenue,
NW. The rest of the submarkets leasing activity was predominately
deals for less than 5,000 sf. 2001 S Street, NW and 4315 50th Street,
NW both saw a flurry of deals signed, all of which were under 5,000
sf. Those buildings alone accounted for nearly 20,000 sf of positive
absorption. There were no notable large-scale move-outs during the
quarter but expect some in the near future. After Fannie Mae signed
for 700,000 sf in the East End last quarter, the GSEs existing buildings
on Wisconsin Avenue NW will likely go to market for a redevelopment
play. Given the slow leasing market in Uptown, expect the property to
undergo a repurpose play and potentially change its use to residential.

16%

100

12%

0
-100

8%

-200

4%

-300
-400

05

06

4000 Connecticut Avenue, NW, the 630,000-sf building


that was left almost fully vacant with Intelsats departure,
is undergoing extensive renovations in an effort to attract
Washington, DCs growing base of technology and creative
tenants. While it will likely take some time, a successful
lease-up of this building could help turn things around in
Uptown.

07

08

09

Net Absorption

10

11

Deliveries

12

13

14 YTD
2015
Vacancy Rate

0%

Vacant and Available Space


1.8
1.6
1.4
1.2
1.1

1
0.8

0.2

0.7

0.6

0.5

0.5

Q4 10

Q4 11

Q4 12

Q4 13

0.4
0.2

0.4

0.3

0.9

0.9

Q4 14

Q2 15

0.8

0.1

0.6

Vacant

Marketed Available (not yet vacant)

2010

2011

Asking Rent
$50

Full Service PSF

$40.82 FS

200

Outlook
Uptowns year-end 2014 vacancy rate of 13.0% is
significantly elevated from the submarkets ten-year
average vacancy of 7.5%. With vacancy up across all of
the District of Columbia submarkets, its likely this will be
the new normal for Uptown. However, most of the large
blocks of available space in Uptown are already vacant,
the submarket inventory is only 6.6 msf and there are no
buildings under construction. Because of these conditions,
even a few moderate-sized leases over the next year will
allow vacancy to trend back downward toward its long
term average.

Asking Rent

0 SF

Net Absorption Deliveries Vacancy

Deliveries

Vacancy Rate

Vacancy
14.1%

Square Feet, 000s

*Arrows = Current Qtr Trend

MSF

Market Indicators

$45
$40
$35
$30
$25

2009

Class A

2012

2013

2014

2015

Class B, $ PSF

DTZ | 12

Appendix

Table Summaries
Metro Washington Office
Market Summary
13
Employment Data
13
Office Availability, Vacancy,
and Net Absorption
14

Metro Washington Office Market Summary: Second Quarter 2015p


Total
Inventory

Total Space
Vacant

Vacancy
Rate

Q2 2015
Absorption

YTD
Absorption

Washington, DC

122,850,343

13,562,737

11.0%

275,133

250,129

Northern Virginia

162,377,414

30,463,789

18.8%

370,078

172,605

Suburban Maryland

72,887,967

13,466,110

18.5%

(79,631)

36,624

Regional Totals

358,115,724

57,492,636

16.1%

665,580

459,358

Trailing 12-Month Data


15
Historical Year-End Data
16

Metro Washington Current Employment Data


Non Farm
Employment
(Jan-June 2014)

Non Farm
Employment
(Jan-June 2015p)

Jobs Added/
Lost*

Percent Change

Washington, DC

751,100

761,950

10,850

1.4%

Northern Virginia

1,376,800

1,397,000

20,200

1.5%

956,550

974,250

17,700

1.9%

3,101,550

3,155,450

53,900

1.7%

Market Statistics by Class


17-18
Survey of New Office Space by
Submarket
19-22
Methodology & Definitions
23

Suburban Maryland
Regional Totals

SOURCE: U.S. Bureau of Labor Statistics (Not seasonally adjusted)


* Average per year to date
p - preliminary

www.dtz.com | 13

39,812,897

5,921,127

4,642,579

10,289,374

13,382,559

3,736,758

6,564,289

122,850,343

East End

West End/
Georgetown

Capitol Hill

NoMa

Southwest

Capitol
Riverfront/
Southeast

Uptown

TOTAL

p - preliminary

38,500,760

CBD

Total
Inventory

1,347,347

219,320

122,042

724,310

72,067

73,176

136,432

New Space
Vacant

11,437,285

859,457

175,093

1,152,276

672,262

352,003

680,977

4,154,902

3,390,315

Relet Space
Vacant

778,105

62,886

10,800

36,638

30,999

10,866

25,905

333,515

266,496

Sublet
Space
Vacant

13,562,737

922,343

405,213

1,310,956

1,427,571

434,936

706,882

4,561,593

3,793,243

Total Space
Vacant

Office Availability, Vacancy, and Net Absorption, Second Quarter 2015p

11.0%

14.1%

10.8%

9.8%

13.9%

9.4%

11.9%

11.5%

9.9%

Vacancy
Rate (%)

126,268

38,339

50,548

25,932

3,600

7,849

New Space
Absorption

179,932

(29,438)

(3,624)

(4,035)

(13,909)

(513)

10,504

119,636

101,311

Relet Space
Absorption

(31,067)

(8,959)

9,799

(5,464)

5,325

18,108

(7,290)

(58,871)

16,285

Sublet
Space
Absorption

275,133

(38,397)

44,514

(9,499)

41,964

43,527

3,214

64,365

125,445

Total
Absorption

Appendix

DTZ | 14

39,708,356

6,019,052

4,642,579

10,289,374

13,382,559

3,736,758

6,517,701

122,941,139

East End

West End/
Georgetown

Capitol Hill

NoMa

Southwest

Capitol Riverfront/
Southeast

Uptown

TOTAL

p - preliminary

38,644,760

CBD

3rd Qtr
2014

Trailing 12-Month Data

122,889,802

6,564,289

3,736,758

13,382,559

10,289,374

4,642,579

5,921,127

39,708,356

38,644,760

4th Qtr
2014

122,850,343

6,564,289

3,736,758

13,382,559

10,289,374

4,642,579

5,921,127

39,812,897

38,500,760

1st Qtr
2015p

Total Inventory

122,850,343

6,564,289

3,736,758

13,382,559

10,289,374

4,642,579

5,921,127

39,812,897

38,500,760

2nd Qtr
2015p

11.5%

13.3%

13.2%

10.2%

14.1%

10.8%

13.8%

11.0%

10.9%

3rd Qtr
2014

11.2%

13.0%

12.4%

10.1%

13.9%

10.8%

12.4%

10.7%

10.9%

4th Qtr
2014

11.3%

13.5%

12.0%

9.7%

14.3%

10.3%

12.0%

11.6%

10.2%

1st Qtr
2015p

Vacancy Rate (%)

11.0%

14.1%

10.8%

9.8%

13.9%

9.4%

11.9%

11.5%

9.9%

2nd Qtr
2015p

(255,763)

9,499

(14,532)

16,555

68,069

(193,596)

(140,575)

(77,640)

76,457

3rd Qtr
2014

197,943

41,706

18,180

10,105

13,454

(1,011)

(14,688)

121,711

8,486

4th Qtr
2014

(25,004)

(22,760)

12,882

54,501

(43,179)

24,583

25,466

(296,022)

219,525

1st Qtr
2015

Total Absorption

275,133

(38,397)

44,514

(9,499)

41,964

43,527

3,214

64,365

125,445

2nd Qtr
2015

Appendix

www.dtz.com | 15

39,225,153

6,019,052

4,504,027

9,636,850

13,907,238

3,736,758

6,408,307

122,155,805

East End

West End/
Georgetown

Capitol Hill

NoMa

Southwest

Capitol Riverfront/ Southeast

Uptown

TOTAL

p - preliminary

38,718,420

CBD

2012

Historical Year-End Data

122,183,159

6,489,940

3,736,758

13,516,238

10,289,374

4,642,579

6,019,052

38,522,051

38,967,167

2013

122,889,802

6,564,289

3,736,758

13,382,559

10,289,374

4,642,579

5,921,127

39,708,356

38,644,760

2014

Total Inventory

122,850,343

6,564,289

3,736,758

13,382,559

10,289,374

4,642,579

5,921,127

39,812,897

38,500,760

2015p

10.6%

7.4%

17.6%

8.1%

10.0%

5.2%

10.2%

10.4%

12.3%

2012

10.6%

7.2%

18.6%

9.8%

16.2%

6.3%

5.7%

9.1%

11.8%

2013

11.2%

13.0%

12.4%

10.1%

13.9%

10.8%

12.4%

10.7%

10.9%

2014

Vacancy Rate (%)

11.0%

14.1%

10.8%

9.8%

13.9%

9.4%

11.9%

11.5%

9.9%

2015p

(95,156)

109,221

(36,363)

(206,657)

39,153

183,514

5,912

(411,536)

221,600

2012

550,914

51,902

(41,373)

(223,402)

175

88,177

152,871

175,785

346,779

2013

(489,588)

(373,697)

219,686

(149,719)

127,212

(208,225)

(515,786)

136,495

274,446

2014

Total Absorption

250,129

(61,157)

57,396

45,002

(1,215)

68,110

28,680

(231,657)

344,970

2015p

Appendix

DTZ | 16

Market Statistics
Washington, DC 2nd Quarter 2015 Market Statistics

Buildings

Total
Inventory
(SF)

New
Vacancy
(%)

Relet
Vacancy
(%)

Sublet
Vacancy
(%)

Total
Vacancy*
(%)

Total
Availability
(%)

Net Absorption
Current QTR
(SF)

Under
Construction
(SF)

Average
Asking
Rent
(FS)

102

22,620,478

0.6%

9.1%

0.7%

10.4%

15.1%

136,999

405,225

$55.10

128

15,002,584

0.0%

8.7%

0.7%

9.4%

13.1%

3,081

135,798

$42.96

20

877,698

0.0%

5.1%

0.0%

5.1%

3.7%

-14,635

$37.43

TOTAL

250

38,500,760

0.4%

8.9%

0.7%

9.9%

14.3%

125,445

541,023

$50.25

116

30,908,031

0.2%

10.8%

0.9%

11.9%

21.3%

(56,189)

932,371

$57.43

65

7,921,789

0.0%

9.9%

0.7%

10.6%

18.1%

120,066

$43.76

22

983,077

0.0%

3.4%

1.0%

4.4%

8.1%

488

$48.96

TOTAL

203

39,812,897

0.2%

10.4%

0.8%

11.5%

21.0%

64,365

932,371

$54.51

CBD
Class

East End
Class

West End/Georgetown
Class
A

23

3,886,159

0.0%

13.8%

0.7%

14.5%

17.9%

1,244

$50.00

29

1,942,755

0.0%

7.4%

0.0%

7.4%

11.4%

(5,086)

$41.01

92,213

0.0%

0.0%

0.0%

0.0%

n/a

7,056

n/a

TOTAL

58

5,921,127

0.0%

11.5%

0.4%

11.9%

15.7%

3,214

$47.76

13

2,865,971

2.5%

8.1%

0.3%

10.9%

16.9%

54,049

966,917

$58.29

17

1,364,132

0.0%

6.2%

0.2%

6.4%

17.6%

(8,772)

$42.15

14

412,476

0.0%

8.3%

0.0%

8.3%

8.0%

-1,750

$44.90

TOTAL

44

4,642,579

1.6%

7.6%

0.2%

9.4%

14.9%

43,527

966,917

$53.72

32

9,497,067

7.6%

4.5%

0.2%

12.3%

15.1%

54,319

200,000

$52.04

730,545

0.0%

26.7%

1.0%

27.7%

19.6%

2,275

$29.25

61,762

0.0%

88.1%

0.0%

88.1%

23.4%

-14,630

$24.01

TOTAL

39

10,289,374

7.0%

6.5%

0.3%

13.9%

15.8%

41,964

200,000

$47.60

Capitol Hill
Class

NoMa
Class

* Total Vacancy - the vacancy rate is calculated using the combined total of relet, sublet and new vacant space.
www.dtz.com | 17

Market Statistics
Washington, DC 2nd Quarter 2015 Market Statistics

Buildings

Total
Inventory
(SF)

New
Vacancy
(%)

Relet
Vacancy
(%)

Sublet
Vacancy
(%)

Total
Vacancy*
(%)

Total
Availability
(%)

Net Absorption
Current QTR
(SF)

Under
Construction
(SF)

Average
Asking
Rent
(FS)

Southwest
Class
A

23

10,099,177

1.2%

7.1%

0.4%

8.6%

13.1%

(35,449)

553,879

$47.72

11

3,283,382

0.0%

13.4%

0.0%

13.4%

23.9%

25,950

$40.43

TOTAL

34

13,382,559

0.9%

8.6%

0.3%

9.8%

14.9%

(9,499)

553,879

$45.75

Capitol Riverfront/Southeast
Class
A

11

3,736,758

5.9%

4.7%

0.3%

10.8%

16.2%

44,514

$41.94

TOTAL

11

3,736,758

5.9%

4.7%

0.3%

10.8%

16.7%

44,514

$42.32

12

2,126,653

0.0%

2.9%

2.1%

4.9%

8.2%

(26,393)

$40.90

55

3,603,081

0.0%

21.7%

0.2%

22.0%

26.6%

(23,692)

$40.95

31

834,555

0.0%

2.0%

1.2%

3.2%

3.2%

11,688

$37.25

TOTAL

98

6,564,289

0.0%

13.1%

1.0%

14.1%

18.6%

(38,397)

$40.82

Uptown
Class

Washington, DC
Class
A

332

85,740,294

1.6%

8.8%

0.7%

11.0%

17.2%

173,094

3,058,392

$54.33

310

33,848,268

0.0%

11.0%

0.5%

11.6%

17.1%

113,822

135,798

$41.82

95

3,261,781

0.0%

5.6%

0.6%

6.2%

6.3%

(11,783)

$40.42

TOTAL

737

122,850,343

1.1%

9.3%

0.6%

11.0%

17.0%

275,133

3,194,190

$50.35

* Total Vacancy - the vacancy rate is calculated using the combined total of relet, sublet and new vacant space.

DTZ | 18

www.dtz.com | 19

Brookfield Office Properties


Laborers' International Union of North
Mid $60's FS
America

2001 M Street, NW

905 16th Street, NW

Douglas Development
Gould Property Company

1000 F Street, NW

600 Massachusetts Avenue, NW

$44.00-$51.00 NNN

Republic Properties Corporation

660 N Capitol Street, NW

= Full Service NN = Plus Electric & Char


= Plus Electric NT = Plus Taxes

FS
N

U/C = Under Construction

U/R = Under Renovation

NNN = Net of all Operating Expenses and Taxes

Operating Expense and Real Estate Tax Base

Status

Total

Withheld

RENTAL RATE

OWNER/DEVELOPER

200 and 250 Massachusetts Avenue,


Property Group Partners
NW

U/C

U/C

STATUS

U/C

U/R

U/C

STATUS

U/C

U/C

STATUS

Low to Mid $50's NNN U/C

BUILDING ADDRESS

Capitol Hill/ NoMa

Total

$54.00 NNN

Boston Properties

601 Massachusetts Avenue, NW


$55.00-$65.00 NNN

RENTAL RATE

OWNER/DEVELOPER

BUILDING ADDRESS

East End

Total

Mid $60's NNN

The JBG Companies

900 16th Street, NW


$45.00-$55.00 NNN

RENTAL RATE

OWNER/DEVELOPER

BUILDING ADDRESS

CBD

1Q18

1Q16

DELIVERY
DATE

3Q16

3Q16

4Q15

DELIVERY
DATE

1Q16

1Q16

1Q16

DELIVERY
DATE

1,166,917

966,917

200,000

RENTABLE
BUILDING
AREA

932,371

364,962

94,655

472,754

RENTABLE
BUILDING
AREA

542,523

135,798

284,000

122,725

RENTABLE
BUILDING
AREA

1,166,917

966,917

200,000

AVAILABLE
SPACE

287,769

123,659

86,572

77,538

AVAILABLE
SPACE

303,994

37,664

234,000

32,330

AVAILABLE
SPACE

Washington, DC Survey of Office Space Under Construction/Under Renovation

0%

0%

0%

PERCENT
PRELEASED

69%

66%

9%

84%

PERCENT
PRELEASED

44%

72%

18%

74%

PERCENT
PRELEASED

N/A

N/A

MAJOR TENANTS

Venable

N/A

Arnold & Porter

MAJOR TENANTS

Laborers' International Union of North


America

Bracewell Giuliani

Miller & Chevalier

MAJOR TENANTS

DTZ | 20

N
NNN = Net of all Operating Expenses and Taxes

= Full Service NN = Plus Electric & Char


= Plus Electric NT = Plus Taxes

FS

U/R = Under Renovation

3,195,690

TOTAL CURRENTLY UNDER


CONSTRUCTION/RENOVATION

Operating Expense and Real Estate Tax Base

966,917

2018 DELIVERIES

Status

212,596

2017 DELIVERIES

U/C = Under Construction

1,202,140

AVAILABLE
SPACE

RENTABLE
BUILDING
AREA

2,312,557

966,917

212,596

714,225

418,819

553,877

212,596

341,281

AVAILABLE
SPACE

553,879

212,596

341,283

RENTABLE
BUILDING
AREA

2016 DELIVERIES

3Q17

3Q15

DELIVERY
DATE

814,037

U/C

U/C

STATUS

2015 DELIVERIES

Washington, DC Summary

Total

PN Hoffman / Madison Marquette

The Wharf Phase 1- 800 Maine


Avenue, SW
Mid to High $50's FS

Trammell Crow Company / Columbia


Withheld
Funding Corp

400 6th Street, SW A.K.A. 500 D


Street, SW

RENTAL RATE

OWNER/DEVELOPER

BUILDING ADDRESS

Southwest/Capitol Riverfront/Southeast

Washington, DC Survey of Office Space Under Construction/Under Renovation

28%

0%

0%

41%

49%

PERCENT
PRELEASED

0%

0%

0%

PERCENT
PRELEASED

N/A

N/A

MAJOR TENANTS

www.dtz.com | 21

Furioso Development
Perseus Realty
Brookfield Office Properties
Akridge
Hines
Union Investments
Hines

1525 14th Street, NW

1728 14th Street, NW

799 9th Street, NW

1200 17th Street, NW

AAMC
655 K Street, NW

600 13th Street, NW

CityCenter DC
North and South Towers
800/850 10th Street, NW

= Plus Electric NT = Plus Taxes

NNN = Net of all Operating Expenses and Taxes

= Full Service NN = Plus Electric & Char

FS

Operating Expense and Real Estate Tax Base

Total

OWNER/DEVELOPER

BUILDING ADDRESS

2014 Deliveries

$46.50 FS

N/A

RENTAL RATE

$47.00-$53.00 NNN

RENTAL RATE

Withheld

$54.00-$57.00 NNN

$50.00-$57.00 NNN

East End

East End

East End

CBD

East End

Uptown

Uptown

SUBMARKET

East End

SUBMARKET

1,473,976

531,652

221,659

273,454

168,837

204,025

27,761

46,588

RENTABLE
BUILDING
AREA

104,541

104,541

RENTABLE
BUILDING
AREA

165,130

1,328

24,845

28,122

67,613

43,222

NEW SPACE
AVAILABLE

26,869

26,869

NEW SPACE
AVAILABLE

*Vacancy rate for new office space- does not include relet or sublet space available

Delivered 1Q14

Renovation
$44.00-$48.00 NNN
Completed 1Q14

Delivered 2Q14

Delivered 3Q14

Renovation
$47.00-$53.00 NNN
Completed 3Q14

Delivered 3Q14

Delivered 4Q14

STATUS

Delivered 1Q15

ASB Real Estate Investments / MRP


Realty, Inc

900 G Street, NW

Total

STATUS

OWNER/DEVELOPER

BUILDING ADDRESS

2015 Deliveries

Washington, DC Survey of New Office Space

11%

0%

11%

10%

40%

21%

0%

0%

VACANCY RATE
(AS OF CURRENT
QUARTER)*

26%

26%

VACANCY RATE
(AS OF CURRENT
QUARTER)*

97%

85%

79%

60%

73%

100%

100%

PERCENT LEASED UPON


DELIVERY

40%

PERCENT LEASED UPON


DELIVERY

DTZ | 22

Renovation
$48.00-$52.00 FS
Completed 3Q13
Renovation
Low-Mid $40's FS
Completed 2Q13
Delivered 1Q13

Carr Properties
First Potomac Realty Trust / The
Lenkin Company Management
Douglas Development Corporation
Angelo Gordon / Monument Realty /
Verizon Communications
Douglas Development Corporation

1700 New York Avenue, NW

440 1st Street, NW

Wonder Bread Building


641 S Street, NW

2055 L Street, NW

Arch Square
801-803 7th Street, NW

Boston Properties

Broadcast Center Partners, LLC

Potomac Investment Properties

500 N Capitol Street, NW

Offices at Progression Place


1805 7th Street, NW

1000 Connecticut Avenue, NW

= Plus Electric NT = Plus Taxes

NNN = Net of all Operating Expenses and Taxes

= Full Service NN = Plus Electric & Char

FS

Operating Expense and Real Estate Tax Base

Total

OWNER/DEVELOPER

BUILDING ADDRESS

2012 Deliveries

Total

Delivered 4Q13

Trammell Crow Company

Uptown

Capitol Hill

SUBMARKET

East End

CBD

Uptown

Capitol Hill

CBD

NoMa

High $40's to Mid $50's FS CBD

N/A

$44.00-$48.00 NNN

RENTAL RATE

N/A

N/A

$55.00 NNN

$52.00-$55.00 FS

NoMa

SUBMARKET

715,373

385,791

98,243

231,339

RENTABLE
BUILDING
AREA

1,145,399

25,000

126,760

81,633

137,495

121,987

289,524

363,000

RENTABLE
BUILDING
AREA

29,457

12,896

16,561

NEW SPACE
AVAILABLE

709,234

53,586

3,124

289,524

363,000

NEW SPACE
AVAILABLE

*Vacancy rate for new office space- does not include relet or sublet space available

Delivered 2Q12

Delivered 4Q12

Delivered 4Q12

STATUS

Delivered 1Q13

Delivered 4Q13

$30.00's NNN

Sentinel Square Phase II


1050 1st Street, NE

Delivered 4Q13

StonebridgeCarras

RENTAL RATE

Three Constitution Square


175 N Street, NE

STATUS

OWNER/DEVELOPER

BUILDING ADDRESS

2013 Deliveries

Washington, DC Survey of New Office Space

4%

3%

0%

7%

VACANCY RATE
(AS OF CURRENT
QUARTER)*

62%

0%

0%

0%

39%

3%

100%

100%

VACANCY RATE
(AS OF CURRENT
QUARTER)*

83%

52%

82%

PERCENT LEASED UPON


DELIVERY

76%

74%

0%

14%

78%

0%

0%

PERCENT LEASED UPON


DELIVERY

Methodology & Definitions


Methodology

Explanation of Terms

Market statistics are calculated from a


base building inventory made up of office
properties deemed to be competitive in
the typical Washington, DC office market.
Single-tenant buildings and privately-owned
buildings in which the federal government
leases space are included. Generally, owneroccupied and federally-owned buildings
are not included. Older buildings unfit for
occupancy or ones that require substantial
renovation before tenancy are generally
not included in the competitive inventory.
Vacant space is defined as space that is
physically vacant and available immediately.
Sublet space still occupied by the tenant is
not counted as vacant space.

Total Inventory: The total amount of office


space (in buildings greater than 10,000
square feet) that can be rented by a Fourth
party.
New Space Vacant: First generation, neveroccupied office space in newly constructed
or substantially renovated buildings, being
actively marketed by a landlord.
Relet Space Vacant: Second-generation,
unoccupied office space being actively
marketed by a landlord. (Space that is
marketed but largely occupied is not counted
as vacant space.)
Sublet Space Vacant: Second-generation,
unoccupied space being actively marketed
by a tenant. (Sublet space that is marketed
but still occupied is not counted as vacant
space.)
Total Space Vacant: The sum of new, relet,
and sublet space that is unoccupied and
being actively marketed.
Vacancy Rate: The amount of unoccupied
space (new, relet, and sublet) expressed as
a percentage of total inventory. (Total Space
Vacant divided by Total Inventory.)

Total Space Available: The total amount


of space, both vacant and occupied, being
actively marketed for lease by a tenant
or landlord. (This includes space that is
currently occupied but marketed for future
availability.)
Availability Rate: The total amount of
space being actively marketed for lease
(both vacant and occupied) expressed as a
percentage of total inventory. (Total Space
Available divided by Total Inventory.)
Absorption: The net change in occupied
space between two points in time. (Total
occupied space in the previous quarter
minus total occupied space in the current
quarter, quoted on a net, not gross, basis.)
New Space Absorption: The net change in
occupied new space between two quarters.
Relet/Sublet Absorption: The net change
in occupied relet and sublet space between
two quarters.
Total Absorption: The The net change in
total occupied (new, relet, and sublet) space
between two quarters.

Disclaimer
This report and other research materials may be found on our website at www.dtz.com. This is a research document of DTZ in Washington, DC. Questions related to
information herein should be directed to the Research Department at 202-463-2100. Information contained herein has been obtained from sources deemed reliable and no
representation is made as to the accuracy thereof.
About DTZ
DTZ is a global leader in commercial real estate services providing occupiers, tenants and investors around the world with a full spectrum of property solutions. The companys
core capabilities include agency leasing, tenant representation, corporate and global occupier services, property management, facilities management, facility services, capital
markets, investment and asset management, valuation, research, consulting, and project and development management. DTZ provides property management for 1.9 billion
square feet, or 171 million square meters, and facilities management for 1.3 billion square feet, or 124 million square meters. The company completed $63 billion in transaction
volume globally in 2014 on behalf of institutional, corporate, government and private clients. Headquartered in Chicago, DTZ has more than 28,000 employees who operate
across more than 260 offices in 50 countries and represent the companys culture of excellence, client advocacy, integrity and collaboration.
DTZ announced an agreement to merge with Cushman & Wakefield in a May 11 press release. The new company, which will operate under the Cushman & Wakefield brand,
will have revenues over $5.5 billion, over 43,000 employees and will manage more than 4 billion square feet globally on behalf of institutional, corporate and private clients.
The agreement is subject to customary closing conditions and is expected to close before the end of 2015. For further information, visit: www.dtz.com or follow us on Twitter
@DTZ.

www.dtz.com | 23

Visit www.dtz.com for more information on the full range of DTZ


commercial real estate services or contact:
Nathan Edwards
Vice President
2101 L Street, NW, Suite 700
Washington, DC 20037
+1 202 463 2100
Northern Virginia
CJ Hardy
Research Analyst
2101 L Street, NW, Suite 700
Washington, DC 20037
+1 202 463 2100
Washington, DC & Suburban Maryland
Joseph Wood
Research Analyst
2101 L Street, NW, Suite 700
Washington, DC 20037
+1 202 463 2100

About DTZ

DTZ is a global leader in commercial real estate services providing occupiers, tenants and investors
around the world with a full spectrum of property solutions. The companys core capabilities include
agency leasing, tenant representation, corporate and global occupier services, property management,
facilities management, facility services, capital markets, investment and asset management, valuation,
research, consulting, and project and development management. DTZ provides property management
for 1.9 billion square feet, or 171 million square meters, and facilities management for 1.3 billion square
feet, or 124 million square meters. The company completed $63 billion in transaction volume globally
in 2014 on behalf of institutional, corporate, government and private clients. Headquartered in Chicago,
DTZ has more than 28,000 employees who operate across more than 260 offices in 50 countries and
represent the companys culture of excellence, client advocacy, integrity and collaboration.
DTZ announced an agreement to merge with Cushman & Wakefield in a May 11 press release. The
new company, which will operate under the Cushman & Wakefield brand, will have revenues over $5.5
billion, over 43,000 employees and will manage more than 4 billion square feet globally on behalf of
institutional, corporate and private clients. The agreement is subject to customary closing conditions
and is expected to close before the end of 2015. For further information, visit: www.dtz.com or follow us
on Twitter @DTZ.
Publication date: 7.30.15
Copyright 2015 DTZ. All rights reserved.

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