Washington, DC office market reports

Q3 2023

Through the end of Q3 2023, the Washington, DC office market has continued to remain in a state of limbo, as is the case with many markets around the country. There remains a sizeable disconnect between buyers and sellers, which has resulted in continued suppressed investment volume, caused by rising interest rates and general uncertainty as it relates to the future of office utilization. What little investment activity that has occurred, has generally done so as a result of distress or change in use, most notably, office to residential conversions. However, the Trophy segment of the market continues to be the bright spot, showing continued signs of tightening, and with the development pipeline for all intents and purposes shut off, this will continue for the foreseeable future.

$545 mm

Investment volume 2023 YTD

A continuation of themes from previous quarters in 2023, DC has continued to see suppressed investment in office buildings. DC has recorded just one sale over $100mm this year, and it comes in the form of a ground lease being purchased by Stonebridge and Rockefeller from WMATA. The remainder of the investment volume comes in the form of opportunistic investments that will likely materialize as some sort of change in use, most notably office to residential.

11.5%

Vacancy rate in trophy buildings

While the broader office market remains in a state of disarray, there are glimmers of hope. Trophy office, specifically new construction, has continued to outperform its peers. This segment of the market is the only class of DC office to see any sort of rent growth in recent quarters, as supply has tightened and options for prospective tenants continue to dwindle. One thing to note is with pending leases, this number is poised to drop. 

$2.1B

CMBS debt set to mature before 2030 collateralized by office assets

Between 2024 and 2030, over $2.1 Billion of CMBS debt is set to mature that is collateralized by office assets. With the deterioration of the underlying collateral, it will be interesting to monitor how investors decide to face upcoming debt maturities. With higher interest rates and the future of office utilization and underwriting unclear, this phenomenon will result in a correction in the office market. However, this wall of maturing debt will drive increased investment activity as owners will be forced to either refinance or sell their assets.

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Get in-depth office market reports and insights from commercial real estate experts in the Washington DC Metro area. Avison Young advisors look at Washington, DC commercial real estate activities and the latest Washington, DC statistics to provide you expert market research on Washington DC's office properties.

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