Washington D. C., office market achieves record high net absorption in 2010
- January 4, 2011
The New Year is off to a good start for the office real estate market in Washington, D.C. Not only did the nation’s capital lead the country in leasing and sales volume in the fourth quarter, Washington ranks No. 2 as the second best global and U.S. city for foreign investment.
According to CB Richard Ellis, Washington achieved total net absorption of 4.3 million square feet by the end of 2010, a record high. Overall vacancy rates fell below 10 percent to 9.8 percent, more than two percentage points lower than the five-year peak of 12 percent reached in the first quarter of 2010. This represented the second-largest decline in the vacancy rate of any market in the country behind Manhattan.
Northern Virginia also saw declines in vacancy and activity by developers in the planning stages for new construction.
In terms of investment sales, there was nearly a 175 percent increase in overall transactions in 2010. CB Richard Ellis reported 53 closed sales representing $4.8 billion. Fifty-five percent of the activity occurred in the downtown, D.C. markets, 42 percent in Northern Virginia and 3 percent in Maryland.
On the pricing side, Washington again came out on top, with prices for trophy assets exceeding $800 per square foot in downtown markets. Overall, the average price per square foot for non-trophy assets was $476 per square foot in the District. The average price per square foot for office assets inside the Capital Beltway, including the Northern Virginia and Maryland markets, was $336 per square foot. Outside the Beltway, the price fell to $205.
In an annual survey by members of the Association of Foreign Investors in Real Estate, Washington came in at No. 2, behind New York, as the best U. S. city and best global city for foreign investor dollars in 2011.
“Washington, D.C., continues to be one of the most attractive global real estate markets, ranking with London and Tokyo for activity and desirability,” Ernie Jarvis, managing director of CBRE’s Washington office said in a statement. Looking ahead, he added, “The market is changing fast and landlords , no longer feeling desperate to secure tenants by any means necessary, are being more cautious with offering aggressive concession packages as the market will be supply constrained in 2012, 2013 and beyond.”