Maryland, NoVA Office Vacancy Remains High, But Optimism Builds After Q4

Office dynamics across Greater Washington, D.C., are poised for a sea change in 2025, not least because of the incoming Trump administration’s agenda. But positive year-end statistics in Maryland and Northern Virginia also point to a brighter future for DMV office markets, even if the road ahead is uncertain.

Maryland and NoVA’s respective office vacancy rates remain staggeringly high, according to CBRE (CBRE)’s latest pair of quarterly market reports. The volume of unleased office space for both regions has trended upward since 2020, resting at 21 percent and 23.6 percent in the fourth quarter of this year, respectively. 

Yet those rates are still 40 and 10 basis points lower, respectively, than in the previous quarter due to decent positive absorption in the fourth quarter, driven by lease renewals and new tenant locations. That’s particularly true of Northern Virginia, defined by CBRE’s report as Arlington, Loudoun, Prince William and Fairfax counties and the City of Alexandria, which saw 1.8 million square feet of activity. Although total absorption in NoVA throughout 2024 remained negative, to the tune of nearly 1 million square feet, the sheer amount of transactions in the fourth quarter boosted the year’s leasing activity 13 percent higher than 2023, per CBRE.

Tech companies Science Applications International Corporation (SAIC) and Lockheed Martin’s Zeta Associates signed the quarter’s biggest lease deals in the region by far, with SAIC’s 241,283-square-foot renewal of its space at 4801 Stonecroft Boulevard in Chantilly in November, and Zeta’s 210,190-square-foot lease at 10302 and 10304 Eaton Place in the City of Fairfax. 

Zero new office properties were delivered in Northern Virginia in the final three months of the year, though a 239,505-square-foot property broke ground at the One Loudoun mixed-use development in Ashburn, according to CBRE. One other 205,000-square-foot project is still in the pipeline in Reston, and is expected to deliver late 2025, though it’s still looking for its first lease. 

Asking rental rates in NoVA remained stable quarter-over-quarter, averaging $37.57 per square foot per year. 

Although the numbers differ for suburban Maryland, defined by CBRE as Montgomery, Frederick and Prince George’s counties, its office situation is remarkably similar to that of Northern Virginia. The region saw about 500,000 square feet of leasing activity in the fourth quarter, also mostly driven by renewals, putting the year’s total activity on par with 2023. Absorption for the year was ultimately negative, however, with about 719,000 square feet of occupancy lost, per CBRE. 

Montgomery County’s renewal of its 103,734-square-foot space at 1401 Rockville Pike in Rockville led the pack this quarter, with Eagle Bank’s new 65,000-square-foot lease at 7500 Old Georgetown Road in second place. The other biggest deals of the quarter were less than half the size of Eagle Bank’s lease, such as Institutional Shareholder Service’s 27,418-square-foot renewal and Kaiser Foundation Health Plan’s 22,008-square-foot renewal of their spaces in Rockville. 

Office trades over 50,000 square feet also picked up this year, with 20 buildings selling in suburban Maryland throughout 2024 compared with just nine in 2023. However, the average price per square-foot of this year’s sales was $94.62, 61 percent less than pre-pandemic levels. 

Notably, there were zero office properties that were delivered, or even broke ground, in the region throughout the year. That makes 2024 the first year without any office deliveries in suburban Maryland in over 70 years, according to CBRE. Asking rents meanwhile dipped about 2 percent year-over-year, now averaging $31.25 per square foot, per year. 

As for 2025’s outlook overall, CBRE researchers say that an economy exceeding expectations due to wage growth and low unemployment portend well for future investments. Yet stubborn core inflation, and concerns over potential financial and trade policy, could put upward pressure on interest rates, which could in turn dampen a surge in activity.

Nick Trombola can be reached at ntrombola@commercialobserver.com.