The outlook improved in the Washington, D.C. metro area during the second quarter of 2014 due to promising economic recovery. The sluggish economic growth in the first quarter of the year provided various setbacks for the office market, slowing leasing activity and tightening the construction pipeline. In the second quarter, while office demand remained relatively flat, leasing velocity was primarily based around trophy product in centrally located submarkets, while second-generation suburban assets experienced limited demand. Competition remains strong for efficient and speculative buildings under construction. Overall, traditionally strong segments in the market such as law firms and government contractors remained flat, whereas sectors such as technology and healthcare improved overall leasing fundamentals.
The demand for office space was somewhat limited for the second quarter, as businesses continued to conservatively approach leasing activities, stalling their decisions and using short term holdovers as well as renewals. While leasing activity was minimal, net absorption for the second quarter totalled almost 1.6 million square feet. Northern Virginia experienced the most demand, accounting for 45 percent of all net absorption in the market. Class A office space net absorption totalled 888,000 square feet, as tenants in the market continue to seek quality office space.
Source : DTZ (Groupe UGL)