Washington Metropolitan Area Office Market
| Average Asking Rent (Price/SF) | $42.06 |
| Vacancy Rate (%) | 19.3% |
| Net Absorption (SF) | -780,953 |
Recovery of Washington’s office market contracted in the second quarter. Quarterly net absorption measured negative 780,953 square feet in the second quarter, breaking a 12-month period of improving net occupancy. The strongest driver of regional demand continues to be flight-to-quality. Class A net absorption measured 56,386 square feet in the second quarter of 2022, while Class B/C markets recorded negative 837,339 square feet. Vacancy continued to rise in the second quarter, increasing by 120 basis points over the last 12 months, to 19.3%. New construction deliveries were a leading cause for the rise in vacancy in the second quarter, directly contributing over 900,000 square feet of net-new vacant space. Despite the region’s elevated vacancy and supply and demand imbalance, average asking rents continue to hold value. Average asking rents have increased 0.7% over the last year, to $42.06/SF.
District of Columbia Office Market
| Average Asking Rent (Price/SF) | $56.85 |
| Vacancy Rate (%) | 18.2% |
| Net Absorption (SF) | 54,505 |
The District of Columbia’s improved fundamentals in the second quarter were partly supported by 1.2 million square feet of new construction deliveries. Although this inventory expansion supported rent growth and positive net absorption, it also caused vacancy to rise to 18.2% due to net-new vacant space. Demand remains strongest for the District’s highest-quality assets. Net absorption measured 54,505 square feet in the second quarter of 2022, marking a two-year high. Class A net absorption measured 272,406 square feet, while Class B and C net absorption measured negative 217,901 square feet. Quarterly vacancy measured 18.2%, up 80 basis points from first-quarter 2022 and up 150 basis points in the last year. Average asking rents in the second quarter of 2022 measured $56.85/SF, equating to a $0.22/SF increase from last quarter, but a $0.59/SF decrease from one year ago.
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Suburban Maryland Office Market
| Average Asking Rent (Price/SF) | $30.55 |
| Vacancy Rate (%) | 17.9% |
| Net Absorption (SF) | -543,072 |
Suburban Maryland’s office market recovery softened in the second quarter of 2022. Net absorption totaled negative 543,072 square feet on the quarter, nearly twice the contraction registered in the previous quarter. Few examples of net positive occupancy in the quarter enabled the accumulation of significant negative net absorption. The overall vacancy rate registered 17.9% at the end of the second quarter, an increase of 70 basis points from the previous quarter and an increase of 210 basis points from a year ago. The average asking rental rate measured $30.55/SF, an increase of 3.7% from the second quarter of 2021, but a decrease of 0.5% from the first quarter of 2022. Office demand has been muted, though with several impending deliveries in 2022, net absorption may improve in the coming quarters.
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Northern Virginia Office Market
| Average Asking Rent (Price/SF) | $34.72 |
| Vacancy Rate (%) | 20.9% |
| Net Absorption (SF) | -292,386 |
Net absorption measured negative 292,386 square feet in the second quarter of 2022, offsetting some of the occupancy gained in the previous quarter. Year-to-date net absorption measured 308,577 square feet. Occupancy contraction in the second quarter of 2022 resulted in a vacancy increase of 20 basis points on the quarter to 20.9%. Over the last six months, the largest contributor to Northern Virginia’s rising vacancy has been the delivery of net-new, unoccupied office space. Despite the steady rise in vacancy and uneven recovery in net absorption, average asking rents continued to increase. Average asking rents appreciated by 1.0% over the last 12 months, reaching $34.72/SF. Leasing activity has been on the rise through the first half of the year; however, this activity is not equitably distributed among all Northern Virginia’s submarkets. Among the region’s largest leases in the second quarter of 2022, over 40% of activity was concentrated in Reston, Herndon, and Route 28.
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