Lawyers, Nonprofits and the Feds Dominate DC Leasing Lately
It often seems that progress comes at a snail’s pace in Washington, D.C.. It’s little surprise then that in light of COVID-19, office leasing has seen a marked slowdown as well.
“Most people hit the pause button on any active leasing, unless it was a necessity or a lease-driven, expiration-related event on a mission critical site,” Steve Spartin, a vice chairman at JLL, said. “We’ve definitely seen a slowdown, comparatively, year over year. We’ve seen a 50 percent decrease in direct leasing volume in Q1 and Q2 compared to the five-year average. A lot of tenants put plans on hold well in advance of their lease, which has been typical for the last decade in Washington.”
The Washington, D.C., office market posted 300,000 square feet of occupancy loss in the second quarter, bringing year-to-date absorption to a negative 601,000 square feet, according to CBRE. This led to a 15.2 percent vacancy rate, marking the first time it ever passed 15 percent in the region.
The largest new D.C. lease so far this year found law firm Wiley leaving its more than 300,000 square feet between 1750 and 1776 K Street NW to take 166,000 square feet at 2050 M Street NW (pictured above). The firm signed a 15-year lease at Tishman Speyer’s new 340,000-square-foot, 11-story trophy building, which Joshua Prince-Ramus of REX designed. The building’s floor-to-ceiling curved glass exterior is a new look for the D.C. market.
Wiley will occupy the third through seventh floors when it relocates in January 2022. Managing partner Peter Shields previously told Commercial Observer that the building’s amenities, location and architectural details attracted the firm. CBRE represented Wiley, and Fried Frank acted as counsel to Tishman Speyer.
The other large lease-signings in the market were renewals or extensions, with the biggest two coming from the federal government. The Department of Education renewed its lease for 290,000 square feet at 550 12th Street SW, contracting its space by 24,000 square feet, according to CBRE. The Department of Homeland Security’s Citizen and Immigration Services extended its lease for 287,000 square feet at 111 Massachusetts Avenue. The two leases combined accounted for 22 percent of the market’s gross leasing volume in the second quarter.
The most leasing activity occurred in the nonprofit sector, accounting for four of the top 10 leases in the second quarter, with 364,000 square feet of leases and 20,000 square feet of increased occupancy, according to CBRE. The National Endowment for Democracy (NED) signed for 82,329 square feet on the 10th and 11th floors at 1201 Pennsylvania Avenue NW in June, an increase of 16,964 square feet over its previous space. Highlights of the 450,000-square-foot building include a 13-story, sun-lit atrium, a rooftop deck with Capitol views, a new fitness center, HVAC upgrades, and three sides of quality window lines. JLL represented the building’s owner, Sentinel Real Estate Corp., and Savills represented NED, which will move into its new space in April.
Other significant deals, according to Savills, included Palantir Technologies renewing its lease for 104,777 square feet at 1025 Thomas Jefferson Street NW and Radio Free Asia renewing and expanding with 80,000 square feet at 2025 M Street NW. Berkeley Research Group renewed its lease for 68,216 square feet at 1800 M Street NW, and Uber Technologies relocated to 55,133 square feet at 1717 Rhode Island Avenue NW.