Office net absorption in the Washington metro area made a full reversal from the dismal performance in the third quarter of 2019. Total absorption during the fourth quarter was 932,000 SF, a huge jump from negative 830,000 SF in the third quarter, and more in line with performance in the earlier quarters of the year. For the first time in over a year, all three substates recorded positive absorption during the quarter. The Washington area’s overall direct vacancy rate (which includes both multi-tenant and single-tenant properties) decreased during the fourth quarter to 13.1%, in line with the resurgence in absorption. The fourth quarter’s vacancy rate is 10 basis points lower than the previous quarter, but still 40 basis points higher than a year ago. The metro-wide direct vacancy rate for just multi-tenant office space decreased 10 basis points from the third quarter to 17.1%. Office effective rent growth cooled somewhat in 2019, as already stratospheric concessions pushed upwards and eroded into gains. The average effective office rent for the Washington metro area is $34.17 per SF as of December 2019, up 1.3% from December 2018. Northern Virginia had the greatest rent increase over the period at 2.1%, followed by Suburban Maryland with 0.8%, and the District with 0.6%.Office investment sales volume in the Washington area during the fourth quarter totaled $2.9 billion at an average price of $312 per SF (including partial interest and portfolio sales) across 26 transactions.

FOURTH QUARTER 2019 HIGHLIGHTS

• Net absorption: 932,000 SF during Q4 2019, up from -830,000 SF during Q3 2019.
• Direct vacancy rate (single and multi-tenant): 13.1% as of Q4 2019, down from 13.2% at Q3 2019 and up 40 basis points from one year prior.
• Under Construction: 10.8million SF.
• Effective rents: Up 1.4% since Q4 2018.
• Investment sales:$2.9 billion ($312/SF) in Q4 2019, compared to $3.1 billion ($330/SF) SF in Q4 2018.

FOR ADDITIONAL INFORMATION, PLEASE CONTACT:

William Rich, CRE: 202.778.3121 Jonathan Chambers: 202.778.3111
President Vice President

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