The Washington, D.C. metro area experienced sluggish economic growth in the first quarter of 2014. The slowed growth comes after various government setbacks in 2013, including sequestration, policy and budget issues, as well as the government shutdown. Although, the Bipartisan Act of 2013 was signed into law to improve confidence and alleviate the challenges created last year, the bill will not directly affect the uncertainty surrounding the local commercial real estate market. The setbacks faced by the Washington, D.C. market in 2013 will continue to impact the region throughout 2014. As Federal Government spending continues to tighten, due to the Budget Control Act, the market will transition more towards the private sector to fuel economic growth.
The overall demand for office space was muted in the first quarter of the year. Businesses conservatively approached leasing activities, stalling their decisions and using short-term holdovers and renewals. Net absorption totalled 681,964 square feet in the first quarter. District of Columbia experienced the most demand, accounting for 83 percent of all net absorption. Class A office space net absorption totalled 464,223 square feet, as tenants in the market continue to seek new and efficient office space. Northern Virginia’s drag on absorption was caused by the U.S. Department of State which vacated 87,000 square feet in the Rosslyn-Ballston submarket and the U.S. Department of Homeland Security which vacated 94,000 square feet in Merrifield/Annandale. In Suburban Maryland, Lockheed Martin vacated 250,000 square feet in the I-270 Corridor submarket.
Source : DTZ (Groupe UGL)