More office space in the D.C. area continues to be vacated than leased, and the region’s office vacancy rate rose further last quarter.
Commercial real estate advisory firm Delta Associates reports office net absorption — the difference between newly leased space and newly vacated space — continued to remain negative in the first quarter, at a negative 107,000 square feet. However, that was an improvement over the negative 349,000 square feet in the final quarter of 2020.
Absorption in Class A, which represents the top class of office space, was a negative-221,000 square feet in the first quarter, compared to a negative 184,000 square feet in the fourth quarter of 2020.
The D.C. area’s overall direct office vacancy rate, including buildings with multiple tenants and those occupied by just one tenant, rose to 13.6% in the first quarter. That’s up from 13.4% in the previous quarter, and up from 13.1% in the first quarter of 2020, when the effects of the pandemic on office space demand were just beginning to be seen.
The direct vacancy rate for multi-tenant buildings alone rose to 17.9% in the first quarter.
While leasing activity has stagnated in the D.C. region, there have been exceptions, including some technology industry leases in Northern Virginia. The largest of the quarter by square footage was Microsoft’s lease for 180,000 square feet at 1300 Wilson Blvd. in Rosslyn for a sales hub.
And suburban Maryland has seen what Delta Associates calls unprecedented demand in the biotech industry, with more than 200,000 square feet of leases for office and lab space in Montgomery County last quarter, most of those tenants new to the region.
Overall, office rents are also lower, but not significantly. Delta Associates says effective office rents last quarter were an average 0.4% lower than the first quarter of 2020.