WASHINGTON, DC–The DC metro region posted 1.1. million square feet of positive net absorption for the third quarter, according to CBRE, with the largest drivers of growth being education, coworking, media as well as the business services sectors.
In fact CBRE singled out the coworking sector as the fastest growing lessee category in the DC metro, which tripled its footprint over the past five years to 3 million square feet. The sector’s rapid expansion continued in the third quarter, with six leases signed for new locations totaling 178,000 square feet, CBRE reported. “While its overall share of the market remains relatively small, the coworking industry’s rapid and continued expansion in DC has been a notable growth driver for the office sector,” said Wei Xie, Research Manager of CBRE’s Washington/Baltimore region.
6 Leases Drove Transactions
The DC office market posted 3.6 million square feet of gross leasing activity in Q3 2018, the highest quarterly volume since Q2 2016. This was driven by six large leases of 100,000 square feet or more, five of which were by government users.
The quarter’s three largest transactions—Whittle School & Studios at 4000 Connecticut Avenue, NW, the Federal Communications Commission at 445 12th Street, SW, and the U.S. Attorney’s Office at 555 4th Street, NW and 501 3rd Street, NW—accounted for 1.7 million square feet of leasing activity. Driven mostly by the Whittle lease, the market posted 843,000 square feet of positive absorption, bringing the year-to-date total to 2.2 million square feet.
Vacancy Rate Drops to 13.2%
CBRE also reported that the lack of new deliveries combined with the positive net absorption pushed the vacancy rate down 40 basis points to 13.2%.
However, new product totaling 3.7 million square feet is slated to deliver by the end of 2019. With a current prelease rate of 60%, the new arrivals are likely to raise the market’s vacancy rate in the next year.