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Commercial construction pulled back sharply in 2015

In this July 2015 WTOP file photo, construction work begins at The Wharf in Southwest D.C., a new development that will include office, retail and residential space. The Council of Governments reports that commercial real estate construction in the Washington region fell 31 percent in 2015 due largely to a slowdown in office construction. (WTOP File Photo/Ari Ashe)

WASHINGTON — Commercial real estate building fell 31 percent last year in the D. C. region — led by a steep decline in new office construction.

New apartment and condo construction is robust in the Washington region, particularly in the District. But with office vacancy rates in the greater region at the highest rates in 20 years, there’s not much incentive to build more office space. And that’s reflected in the drop in total commercial real estate construction — that’s everything except residential building — in the region in 2015, according to a new Metropolitan Washington Council of Governments report.

The decline was more than 3 million square feet of new commercial space, making 2015 one of the lowest years of production for the region in 35 years.

The only category to see an increase in commercial construction last year was industrial properties, including data centers and warehouses.

The Council of Governments reports that since 2009, the overall regional commercial real estate vacancy rate has hovered above the national average, at around 11 percent. But the vacancy rate for office buildings in the region climbed to its highest level in more than 20 years last year, to 14.9 percent.

“The decline in commercial construction mirrors a period of declining federal procurement and stagnant job growth in metropolitan Washington,” COG said in its “State of the Region: Economic Competitiveness Report” released earlier this year.

Federal procurement spending has declined by $11.2 billion since 2010.

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