Overall vacancy held steady during second quarter at 15.3 percent. Newly completed construction added to vacancy, however continued modest leasing activity throughout the market balanced the impact of the new deliveries. Average asking rents moved slightly downward $.5 to $33.11 per square foot. Class B average rent declined to $29.08 (-$.19), while the Class A average held at $36.44 per square foot.
The unemployment rate for the District of Columbia was down 40 basis points from June 2012 at 8.5 percent while the Washington-Arlington-Alexandria, DC-Va-Md-WVa Metropolitan Statistical Area (MSA) increased over the same period from 5.9 to 6.0 percent.
Leasing activity of 4.2 million square feet compared to 4.6 million square feet in the first quarter. At 303,396 square feet, net absorption turned positive for the first time since third quarter 2012. Leasing activity is expected to remain sluggish as many await the full impact of sequestration.
Similar to other market trends, space efficiencies are a major concern with hoteling and telecommuting becoming options for many tenants in Metro DC. Below normal levels of tenant demand will continue as occupancy levels stabilize. An expected surge in lease expirations coupled with a slowdown in construction should ensure balanced fundamentals in core markets in the coming year.
Source : DTZ (Groupe UGL)