Report: Recession Hits D.C. Office Market
- Apr 03, 2009
As the country struggles in the midst of an economic downturn, Washington, D.C., with its large governmental employment sector, has thus far managed somewhat better than most cities. But according to a new report by Cassidy & Pinkard Colliers, the area market is starting to feel some pains. The D.C. metropolitan area office sector met an overall negative net absorption of 817,000 square feet in the first quarter of 2009, up from negative 793,200 square feet in the fourth quarter of 2008, according to the first quarter 2009 Cassidy & Pinkard report. Vacancy rates, meanwhile, have grown in the D.C. region, registering at 11.7 percent and rents continued to fall across the region during the quarter. “The D.C. metro may in fact be in a recession,” Kevin Thorpe, vice president & director of market research at Cassidy & Pinkard Colliers noted. “The region has suffered three consecutive months of job losses, with the brunt of the pain experienced in Northern Virginia and Suburban Maryland.” He added that due to economic compression, much of the market, especially the suburbs, is now giving space back. According to the report, the District of Columbia’s itself actually saw a jump in net absorption during the year’s first quarter, reaching a positive 174,300 square feet–up from positive 86,600 square feet in the fourth quarter of 2008. But other areas are suffering. In Northern Virginia, net absorption was a negative 555,600 square feet in the first quarter, from negative 703,500 square feet in the fourth quarter. And in Suburban Maryland, net absorption was a negative 435,900 square feet in the first quarter, from negative 176,300 square feet in the fourth quarter. But the region’s employment prospects are likely to get a big boost, as the area is home to many government agencies that will get a large chunk of the government’s stimulus package in the coming years. As a result of the stimulus package, roughly 64,000 new jobs are anticipated to be produced in the District. Cassidy & Pinkard predicts that by 2019, the office needs will reach 14 million square feet, with 10 million square feet being required by the close of 2011. And projects that are already in the pipeline continue to move forward. Already 10 million square feet of office space is scheduled to deliver in 2010. Just yesterday, CPN reported that while many office projects are delayed or halted all over the country, Duke Realty Corp. is going ahead with the development of the U.S. Department of Defense’s 1.7 million-square-foot office complex in Alexandria, Va. Duke has just broken ground on the $1 billion project and is on target to complete construction in September 2011, as originally scheduled. Also, Boston Properties Inc.’s 2200 Pennsylvania Ave. in the West End, a 430,000-square-foot office building is still going up on a 60-year ground lease from George Washington University Hospital. Outside the district, Monday Properties plans to break ground this year on 1812 N. Moore St. on top of the Metro station in Rosslyn, Va. Another project is a build-to-suit for National Public Radio’s planned headquarters at 1111 N. Capitol St., N.E.