WASHINGTON, DC--Jones Lang LaSalle presents its Metro DC 1st Quarter 2008 Market Smart report.(For individual Washington, DC, Northern Virginia and Suburban Maryland Market Smarts and for in-depth analysis and intelligence on the various submarkets that comprise the region's office market, please contact John Sikatis, (top right photo) Communications Dept., Jones Lang LaSalle, 1 202 719 5839 or e-mail John.Sikaitis@am.jll.com.)
In challenging times for both investors and occupiers, we strive to create value and hope these reports complement and enhance your business needs.
A Look Back and AheadThe continued slowdown in federal spending and increased delivery of vacant buildings to the market have generally served to reduce net absorption and increase vacancy in Metropolitan Washington, DC. Since the mid-term elections, annual growth in federal procurement contracts to private companies has been slashed from 18 percent to approximately 3 percent.
The large federal funding shortage has caused hiring to recede as local payrolls increased by 28,100 jobs in the twelve months ending in February 2008, the slowest job growth in six years within the region.
While the relocation o
f Volkswagen's North American headquarters from Michigan to suburban Virginia, the Corporate Executive Board's 633,000-square-foot lease at the new Waterview building in Arlington, and a significant move by the Department of Justice to the NoMa submarket in the District highlighted activity, the Metro DC market was largely defined by increased incidents of renewals and a record amount of new development. The supply-demand dynamics essentially stalled rental rate growth in the first quarter and drove aggressive landlord concession packages in outlying markets.
Fundamentals remained deeply divided depending on both location 
and product type, as the trophy segment of the market, in the District's core CBD and East End, Northern Virginia's inside the Beltway markets of Rosslyn-Ballston, Alexandria and Tysons Corner, and Suburban Maryland's Bethesda and Silver Spring CBDs continued to display vacancy levels below market averages and command the highest rental rates.
and product type, as the trophy segment of the market, in the District's core CBD and East End, Northern Virginia's inside the Beltway markets of Rosslyn-Ballston, Alexandria and Tysons Corner, and Suburban Maryland's Bethesda and Silver Spring CBDs continued to display vacancy levels below market averages and command the highest rental rates. Vast inventories of commodity Class A space in the District, along with the Dulles Toll Road in Northern Virginia, a
nd the I-270 Corridor in Maryland, however, offered tenants a multitude of options and placed downward pressure on net effective rents as concession packages have soared.
nd the I-270 Corridor in Maryland, however, offered tenants a multitude of options and placed downward pressure on net effective rents as concession packages have soared.Uncertainties regarding the recovery of the national economy and specifically, the housing, construction and financial sectors, will dampen overall office market fundamentals both nationally and regionally in 2008.
However, regionally, the lack of federal spending growth and excessive new supply delivering to the market will be the true catalysts that lead to a continued overall softening of demand and increase in space options over the coming quarters.
Should you need further information or have questions, please do not hesitate to contact:
Should you need further information or have questions, please do not hesitate to contact:
John Sikaitis
202.719.5839
1801 K St. NW, Suite 1000
Washington, DC 20006
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