Reduced federal spending on real estate, greater efficiencies in space utilization and continued economic uncertainty have caused a softening of the office market in the first quarter throughout metropolitan Washington, D.C., according to research by CBRE Group.
“While this region remains one of the strongest real estate markets in the nation, we are seeing a slowdown as businesses and organizations maintain a holding pattern, awaiting the increased stability in the economic and labor markets. It is an interesting time,” John Germano, executive managing director of CBRE’s Washington-Baltimore region, said in a statement.
In Washington, D.C. the vacancy rate increased to 10.2 percent from 9.8 percent at the end of the fourth quarter 2011. Net absorption was negative 506,888 square feet, with the General Services Administration returning 200,000 square feet in the city’s Central Business District. With a mandate to closely monitor and reduce spending, and a fairly large inventory of shadow space, including more than 300,000 square feet of Securities Exchange Commission space at Constitution Center in Southwest, GSA leasing is projected to be limited for at least the next six months.
The Northern Virginia market saw 1.6 million square feet of space returned to the market. That was primarily the result of BRAC relocations inside the beltway and large government contractors in the western submarkets reducing space requirements. Vacancy rates increased to 15 percent from 14 pecent in the fourth quarter of 2011. The report said smaller-sized tenants were the most active in the leasing market during the first quarter. Companies with requirements for less than 15,000 square feet have taken advantage of lower rates by moving and, in many cases, expanding.
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