February 15, 2006

OFFICE SPACE GLUT LOOMS. The DC commercial market continues to roll on, but for how long. Rents continue to rise. Vacancies are down, but there are lots of construction cranes on the horizon, says the Washington Post.

Both in the Downtown and Capitol Hill submarkets landlords were asking a healthy $44/SF for rent during the fourth quarter. Compared with the third quarter, this a $2.03/SF rise for downtown and a few extra pennies for Capitol Hill.

And the vacancy rate edged lower. In the fourth quarter, the vacancy rate was 7.6 percent, compared with 7.8 percent in the third quarter and 8.1 percent a year ago. Downtown has a vacancy rate of 7.6 percent, Capitol Hill has a rate of 8.8 percent and Georgetown/Uptown has a rate of 5.1 percent, all in the fourth quarter.

About 6 million SF of space is under construction. About 3 million SF downtown and 3.6 million on Capitol Hill. Going forward its going to be tough to fill all that space, and talk of a condo glut could turn into a commerical glut before we all like it.

What's interesting is the fact that Capitol Hill rents are holding strong, given the relatively higher vacancy rate and the amount of space in the pipeline. Now that downtown has been mostly built out, tenants and landlords continue to look for options. And this means going east, rather than west to say Georgetown.

pix by Daquella manera

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