JLL has just released the 2016 U.S. Skyline digital report. Each year, JLL’s research team analyzes the top skylines and gives investors and tenants alike an up-close and personal look at 52 markets across North America, including the Mid-Atlantic region and Washington, DC.
Some observations from the Washington, DC trophy segment include:
- Leasing demand in 2015 and Q1 2016 was solid, with the market recording nearly 1.0 million s.f. positive net absorption over that 15-month period.
- Despite recent absorption gains, demand headwinds are starting to emerge based on a lack of large law firm lease expirations between today and 2019.
- In addition to moderating tenant demand, supply-side pressures are emerging given a ramp-up in speculative construction and redevelopment activity. The current construction pipeline, which includes such developments as 2001 M St, 2000 K St, 1000 F St, 2112 Penn, 1700 M St and Capitol Crossing, totals nearly 4 million s.f., yet large-block lease expirations through 2019 total just 1.9 million s.f.
- Vacancy rates jumped from 9.0% at year-end 2014 to 10.5% as of Q1 2016 (driven in large part by Arnold & Porter’s relocation from 555 12th St to 601 Mass Ave). Trophy vacancy is likely to continue to rise over the next 36 months as new supply outstrips demand.
- Tenants possess leverage in the market in the form of record-high concession packages. Although average asking rents have risen 5% over the past 12 months to $51.28 NNN p.s.f., average tenant improvement allowances for Trophy leases remain in excess of $100 p.s.f., along with free rent equivalent to roughly one month per year of lease term.
For more information and additional market insight, view our 2016 U.S. Skyline digital report or feel free to contact me with any questions. I highly recommend checking out this interactive tool that can be saved, referenced and shared.