CoStar Insights

Despite Solid Job Growth, DC Office Vacancy Continues to Rise

by Max Peker | Oct 07, 2016

DC Office Market

The good news for the DC office market: job growth has picked up after the hit it took from sequestration and BRAC. In fact, office-using employment currently clocks-in about 3% above its pre-recession peak, with the professional and business services sector increasing by 2.6% over the past year, or nearly 20,000 jobs.

DC Employment Growth

But these job gains have not translated into steady absorption, with only 76,000 SF absorbed over the past four quarters. The metro vacancy rate continues to rise:

DC Office Fundamentals

One major reason for this: tenants occupy nearly 10% less SF per employee than they did in 2010. For example, in the District alone, law firms shed over 250,000 SF in recent years because they no longer need extra space for law libraries and traditional partner offices. As they trade older space for newer, more efficient space, they’re shrinking their footprints.

Other office-using employers have downsized their spaces by incorporating open floor plans, or opting for flexible co-working space leased from companies like We Work and Cove.

DC Office SF per Employee

Local tech start-ups, currently working in incubators such as 1776 in Crystal City and DC, have growth potential and may be the key to D.C’s office market recovery. They could fit a niche of wanting prime locations to attract top talent—D.C. has the highest level of educational attainment per capita in the U.S.—while not yet being able to afford premium rents.


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