DC Market Shows Asking Rents Increasing and Active Development Pipeline in Savills Report
The Washington, D.C. office market is proving to be a tenant’s market currently, due to an increase in supply coming online and robust concessions, according to a third-quarter 2019 report from Savills.
Additionally, asking rents are increasing, availability is holding and the development pipeline is extremely active, the report shares.
The region’s overall availability closed the third quarter at 15.8 percent, an increase of 20 points quarter over quarter.
“Availability in D.C. remains elevated and is pushing higher in some submarkets like the [central business district], given a robust pipeline—2 million square feet delivered this year; 4.5 million square feet under construction,” Sarah Dreyer, Savills’ vice president and head of Americas research, told Commercial Observer. “This is presenting tenants with an abundance of options in both new and existing space.”
Availability is projected to remain elevated as construction continues, especially in those areas where development is concentrated.
Additionally, Class A asking rents grew by 1.6 percent since last quarter, reaching $59.91 per square foot on average, with rents increasing to $64.86 in the CBD.
The study shows growth in asking rents has been offset by generous concession packages as landlords compete to fill buildings in a tenant’s market.
“For new leases in top-tier product, tenants can expect to see about 15 months free rent on average, and tenant improvement allowances of up to $130 per square foot,” Dreyer said. “Obviously, this differs based on factors like lease term, building quality and location, but is a good approximate for trophy product in core markets.”
Additionally, generous concessions can offset moving costs, allowing tenants to make a move to better space—often resulting in right-sizing and taking less space—while keeping costs in check.
According to Dreyer, lower floors of new buildings are a particularly attractive option, and buildings are preleasing from the top floors down with remaining space leased at a rental rate discount.
Looking ahead, the study projects conditions to stay relatively the same, and still highly tenant-favorable for the foreseeable future.