From Scott Homa
Senior Vice President, Mid-Atlantic Research Director
Metro DC saw two-thirds of all job growth come via tech during Q1 while the federal government and the financial and legal services industries remained largely stalled in terms of new job creation. It drove leasing activity that mirrored these new employment trends with first quarter transactions by tech firms 2U, Opower and Intelligent Automation among the largest in the region.
Tech industry driving regional employment growth
The suburbs of Suburban Maryland and Northern Virginia saw a big rise in regional leasing activity last quarter. They accounted for 69.5 percent of activity—a more than 17 percent jump from 2015. Tenants – including tech firms and nonprofits– are looking beyond the Central Business District and expanding the geographic scope of their searches as a result of an increasing battle over government incentives; tightening market conditions in D.C. and the enticing value proposition offered by suburban locations.
The District of Columbia experienced an unusually slow period of activity, partially a result of limited law firm lease expirations and continued financial pressure within that sector.
Overall, we expect future growth to be driven by emerging, non-traditional segments of the market. Coworking establishments in particular have been expanding very rapidly in the market, which is reflective of the national trends we’re seeing given the rise of the freelance economy. Moving forward, we envision a more diversified office tenant base, driven not only by law firms, government contractors and federal agencies, but industries across a broad spectrum of the economy that are attracted to the region because of metro D.C.’s excellent workforce demographics, solid business drivers and pro-business governance.