Washington DC Office Market Figures Q2 2022
01 Jul 2022
Despite an uptick in activity during the first quarter of the year, Washington, D.C. office market fundamentals worsened in Q2 2022. Four buildings delivered 1.1 million sq. ft. of new office product in the District during the quarter. Second-generation space vacated by tenants relocating to these properties, paired with continued contractions among government and nonprofit tenants, led to 671,000 sq. ft. of occupancy loss. Vacancy rose 150 basis points (bps) over the prior quarter to 19.9%, which is up 600 bps from pre-pandemic levels. However, the development pipeline is now scarce, with only 830,000 sq. ft. of office product under construction. The dwindling pipeline should allow for the lease-up of existing space and produce a slowdown in the rate at which vacancy has been climbing.
The market recorded 2.1 million sq. ft of gross leasing activity during the quarter. Private-sector tenants leased 1.1 million sq. ft. of space in Q2, down 34% quarter-over-quarter and 47% from pre-pandemic levels. The decline in leasing volume could be a factor of timing, as at least 300,000 sq. ft. of leases are currently pending in the final stages of execution in the District. Touring activity remains promising, although a summer slowdown may occur.
Further headwinds are expected in the office market, as employees continue to embrace remote and hybrid work. With two job openings for every job seeker in the labor market and 12% of job postings marketed as remote, companies continue to search for a new balance of office use and programming.