The Washington D.C. office market remained relatively stable in the third quarter. However, the disparity between premium properties, known as 'Trophy Properties', and the broader market intensified. Tenants leased approximately 1.8 million square feet during this period, which is roughly in line with the market's five-year quarterly average. However, this represents a decrease compared to the 2 million square feet leased in the second quarter, as reported by Savills.
Overall market availability slightly decreased to 24 per cent, while availability for high-end 'Trophy' spaces remained below 10 per cent. The average asking rent for Class A office space increased by 2 cents since the second quarter to $62.31 per square foot per annum. This scarcity of prime space is prompting tenants – especially law firms and government departments – to make decisions years before their leases expire. Simultaneously, it encourages landlords to reposition properties.
Significant Leases and Market Changes
Google completed the largest lease of the quarter, consolidating 210,000 square feet at 500 North Capitol Street NW. Sheppard, another major law firm, signed the largest law firm deal of the quarter, relocating to 107,227 square feet at 2033 K Street NW, a building slated for extensive redevelopment. Greenberg Traurig renewed its lease and expanded its space to 80,089 square feet at 2101 L Street NW.
The local D.C. government also extended leases for 164,110 square feet at 1050 First Street NE and for 74,924 square feet at 645 H Street NE. Both agreements were among the largest transactions of the quarter. However, leasing volume by federal agencies remains a weak point. Savills noted that General Services Administration volume is expected to decline from 2025, as fewer transactions exceeding 100,000 square feet were recorded in the first three quarters.
Decline in Office Stock Due to Conversions
Concurrently, the office stock in D.C. decreased by 4.7 million square feet year-on-year, reaching 118.1 million square feet. This decline is largely attributable to ongoing conversions of office space into residential units, which continuously remove space from the market, thus tightening supply.
- —Google: 210,000 square feet at 500 North Capitol Street NW.
- —Sheppard: 107,227 square feet at 2033 K Street NW.
- —Greenberg Traurig: 80,089 square feet at 2101 L Street NW (expansion and renewal).
- —D.C. Local Government: 164,110 square feet at 1050 First Street NE and 74,924 square feet at 645 H Street NE.
