Washington Metro Area Office Real Estate Market Reports

Washington Metropolitan Area Office Market

The Washington D.C. Metro region experienced positive net absorption of 320,298 SF during Q1 2025. The District, Northern Virginia, and Suburban Maryland all experienced positive net absorption to begin the year on a high note across all three markets. Overall vacancy ended Q1 2025 at 20.6%, tightening slightly quarter-over-quarter, however expanding 60 bps year-over-year. Availability also tightened, ending Q1 2025 at 24.6%, down 10 bps quarter-over-quarter, however, expanding 60 bps year-over-year. Major first-quarter transactions were spread throughout the metro, with three of the five largest deals occurring in the District. The remaining two deals occurred in Northern Virginia and Suburban Maryland. After five deliveries throughout 2024 totaling roughly 1.2 MSF, the market didn’t see a delivery during Q1 2025. The development pipeline ended Q1 2025 with 950,000 SF under construction spread across a further five properties.

District of Columbia Office Market

The District of Columbia experienced 37,698 SF of positive net absorption during the first quarter of 2025. Registering 18.9% as of the first quarter, the vacancy rate has declined 30 basis points quarter-over-quarter and 80 basis points year-over-year. After the Voice of America media network suddenly closed in March, the District still clocked net positive absorption this quarter—a remarkable feat in the wake of 350,000 SF going back to EastBanc, the owner of 1875 Pennsylvania Ave NW. The sole property under construction in the district is 600 Fifth NW, a 400,000-square-foot office building in the East End that is scheduled to deliver in the first quarter of 2026. Half of the building is already preleased to law firm Crowell & Moring. After decreasing year-over-year since 2021, overall asking rental rates rebounded during the first quarter of 2025, with 0.7% annual growth. Still, rents remain 1.5% lower than their peak in 2020. The conversion of obsolete office space to other uses helps to raise average rents to a level more reflective of competitive product. D.C. continues to benefit from one of the lowest sublease availability rates (2.3%) in the nation, ranking #1 among all gateway markets for lowest sublease listings.

Suburban Maryland Office Market

Suburban Maryland saw positive activity during Q1 2025, with 217,000 SF of positive net absorption. This positive net absorption puts the market on a trajectory to have its most positive year since 2019. Overall vacancy ended the quarter at 19.8%, tightening 30 bps quarter-over-quarter, however expanding 30 bps year-over-year. After a building boom over the past five years, the pace of new construction deliveries has begun to slow. There were only two office deliveries in Suburban Maryland in 2023 and no deliveries in 2024. Furthermore, 1600 Rockville Pike is the only property that remains under construction in the market, totaling 237,000 SF. Asking rents continued to rise through 2024, however at a decelerating pace relative to recent years. To begin 2025, however, asking rents have seen a decline, ending Q1 2025 at $31.62 PSF across all asset types, a decrease of 0.4% year-over-year.

Northern Virginia Office Market

Net absorption for the region totaled 65,833 square feet during the first quarter of 2025, leading to a 10-basis-point decline in vacancy over the quarter. Overall vacancy decreased to 22.3% but is up 120 basis points from a year ago. However, overall availability is down 40 basis points from a year ago, to register 25.3% as of the first quarter. Major first-quarter leasing transactions were spread across Northern Virginia submarkets and the largest transactions were new direct leases. The largest was FDIC’s lease of 171,000 square feet at 3701 N Fairfax Drive in Virginia Square. Rents in Northern Virginia averaged $35.57 PSF as of the first quarter of 2025, an increase of 1.7% over the past 12 months. Northern Virginia didn’t experience any deliveries in the first quarter of 2025. The market’s development pipeline remains historically low, with only three properties totaling 312,000 SF under construction as of 1Q25.