D.C. Office Market Shows Signs of Slow and Steady Recovery: Report

Washington, D.C.’s office depression is finally easing, even if economic uncertainty and the Trump administration’s federal shake-ups are still curbing the District’s recovery. 

Office availability rates have steadily declined since the third quarter of 2024, when availability hit a peak 24.4 percent, according to a new quarterly market report from Savills. The current availability rate of 23.3 percent is flat year-over-year. 

While just below the five-year average, leasing activity in the second quarter of this year, at 1.8 million square feet, was also in line with the previous two quarters. The vast majority of that activity — as much as 80 percent — was driven by demand for Class A space, particularly from law firms. Relocation leases from law firms seeking trophy space accounted for four of the 10 largest deals this past quarter, per Savills.

That includes Palo Alto, Calif.-based law firm Cooley, which in April inked a 20-year, roughly 126,000-square-foot pre-lease at BXP’s 725 12th Street NW redevelopment project. Cooley currently operates out of an office just a few blocks south of its future digs. Fellow firm BakerHostetler in May also inked a 83,000-square-foot relocation deal at JBG Smith’s 1717 K Street NW, and Groom Law signed a 38,000-square-foot relocation lease in Georgetown that same month. 

Federal government leasing meanwhile has hit its slowest pace in eight years, according to Savills, with about 700,000 square feet secured by the government in the first half of 2025. The General Services Administration’s decade-long policy of federal downsizing is largely responsible, though President Donald Trump’s policies, and Elon Musk’s cost-cutting efforts earlier this year via his Department of Government Efficiency, have accelerated the trend. Those downsizing efforts are likely to continue affecting the District’s office market, per Savills, though the timing and scope of the impacts remain to be seen.

Still, the U.S. Department of Justice’s 15-year, 403,000-square-foot renewal at Northwestern Mutual’s 145 N Street NE in April was the largest lease deal in the District by far this quarter — even if it represents a 30 percent downsize from the department’s previous lease.

Average asking rent in D.C., at $55.46 per square foot per year, hit its highest point since mid-2022, and is a 1.2 percent gain compared to the second quarter of 2024. Class A asking rents reached $59.22 per square foot, a 1.3 percent increase year-over-year, per Savills. 

Certain office properties within the District (and across the DMV in general) continue to sell at bargain prices, however. That includes 300 M Street SE, a 285,000-square-foot property that Garfield Investments and Broad Creek Capital acquired in late June for just $28 million. The price is equivalent to about one-third of the building’s most recent assessed value of $83 million. 

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