The District of Columbia’s office market faced a significant shock in the second quarter of 2020. The coronavirus halted much of the region’s business activity and forced many firms to restructure their workforce through layoffs, furloughs, and mandatory work from home orders. Pandemic-induced economic uncertainty caused leasing activity to freeze in Q2. Leasing volume fell 66% from year-ago levels and reached an all-time quarterly low. With slow leasing expected in the coming quarters, DC’s oversupplied office market could see its supply-demand imbalance grow wider. Occupancy losses were recorded in Q2, measuring -18,376 SF and bringing year-to-date absorption to -87,071 SF. Vacancy, which reached 14.4% in Q2, will remain elevated in the near term as demand dries up. Tepid demand and a slowing construction cycle have resulted in downward-trending rents thus far in 2020. Overall asking rents in the District of
Columbia fell $0.66 over the las year to $58.00/SF – their lowest levels since 2017. Office market fundamentals in the District of Columbia (DC) continued to cool in the first quarter of 2020. Though quarterly occupancy gains had been consistently large from mid-2016 to mid-2019, slow leasing has led to slack in the market. Further hampering momentum has been the rapid emergence of COVID-19. The impacts of the pandemic on the region’s economy and real estate markets are uncertain; however, it is anticipated that COVID-19 will cause near-term market deceleration. Given mandated social distancing measures, business closures, and suspensions of large gatherings, business activity will grind to a halt in Q2. Although COVID-19 will likely be the most influential economic event of 2020, this report will focus primarily on the real estate and market activities before the onset of COVID-19.