
The office vacancy rate in D.C. ended 2024 at a near record 19.9%, but that doesn’t tell the whole story.
The share of office space emptying out in recent years has been largely in older office buildings, and those considered Class B or Class C, those with few tenant amenities and those that aren’t in prime locations.
Demand for office space in D.C. at the highest end is very high. It is being driven, perhaps ironically, by companies downsizing their existing space, or those moving to D.C. who don’t want to sign leases for large offices.
“It’s really all summed up in three words: ‘Flight to quality.’ We’ve have a lot of companies downsizing their footprints over the last four years, and when they do that, their dollar goes further,” said Tammy Shoham, research director at real estate firm JLL’s D.C. office.
“They can lease smaller, nicer spaces and still save money. For this reason, the top of the market is in increasingly short supply,”
Asking rents for Class A trophy office space in D.C. is at a record high. In the MoMa submarket, the Class A office vacancy rate at the end of 2024 was just 6.2%.
Demand for trophy office space, most likely to attract law firms, nonprofits and associations, which lean toward image for clients and amenities for employees, is also crimped by lack of new supply.
Not one developer broke ground on a new trophy project in D.C. in 2024.
“It just wasn’t penciling out because of higher borrowing costs, labor and building material costs, and risks. While we expect the slow pace of new construction to continue throughout 2025, the drought is ending, but there will still be a shortage of trophy office space in the near future,” Shoham said.
The new year has kicked off with one major trophy project development. BXP, formerly Boston Properties, closed on its acquisition of 725 12th St. NW, a 1990s 12-story building at Metro Center, for $34 million, and plans to demolish it.
BXP will replace it with a modern, 320,000-square-foot Class A building, or what the company called “a premier workplace.”
As evidence of demand for trophy space, law firm McDermott Will & Emery has already committed to leasing the top five floors of the new building, even thought it won’t be completed until 2028. (JLL represented BXP in the lease transaction.)
The current building’s former tenant, law firm Williams & Connolly LP, vacated in 2022 to head for its own new trophy office space at Southwest D.C.’s The Wharf.
Overall, the D.C. office market did show some signs of a rebound in 2024.
According to JLL, the vacancy rate rebounded just slightly in the fourth quarter, reversing vacancy growth since 2020.
Last year’s leasing activity volumes returned to pre-pandemic levels, led by the federal government, law firms, nonprofits and associations. The federal government leased more space last year in D.C. than another other sector.
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