Press Release

Tenant Demand for Agile Space Increases: WeWork Is Now the Largest Private Sector Lessee in D.C.

28 12月 2018


Net Absorption at Highest Levels Since 2010

Washington, D.C. – December 28, 2018 – Coworking continues to drive the District’s real estate market with WeWork surpassing Fannie Mae as the largest private-sector lessee in D.C. with an aggregate footprint of 772,000 square feet, according to fourth-quarter 2018 research reports released by CBRE. The coworking sector added 14 new locations in 2018 with six in the fourth quarter alone.

“In today’s market, tenants are increasingly seeking flexibility and agile workspace solutions,” said Wei Xie, Research Manager, CBRE in the Washington/Baltimore Region. “Our Q4 report shows WeWork, Convene and other coworking companies are expanding their footprint to satisfy demand.”

In the fourth quarter of 2018, the Washington, D.C. office market recorded 580,000 square feet of positive absorption, bringing 2018’s year-end total to 2.8 million square feet—the highest level since 2010. While half the year’s occupancy gain is attributed to two large leases (Fannie Mae at 700,000 square feet and The Whittle School at 666,000 square feet), the coworking sector was the main driver of overall growth in 2018. Coworking contributed more than 650,000 square feet of positive absorption with an additional 102,000 square feet pending lease execution at the end of the fourth quarter.

Development contributed 3.1 million square feet of new construction, the highest level since 2009 and adding 1.2 million square feet of vacant space. Despite elevated vacancy rates due to the high amount of development, asking rents held steady this quarter. Overall rates ended the year at $56.28 per square foot per annum on a full-service basis.

As the economy enters the late cycle phase, the need for businesses to remain nimble and adapt quickly to changing market conditions is reflected by the growing tenant demand for agile workspace solutions.

Report Highlights:

Washington, D.C.

  • In D.C., 78 percent of Q4 leases were in the core submarkets of the central business district (CBD) and East End, which together account for 66 percent of D.C.’s total market inventory.
  • Four buildings delivered during the quarter—all by local developers—totaling 676,000 square feet at a combined prelease rate of 37.2 percent. Three speculative buildings broke ground in Q4 totaling 454,000 square feet, all in the East End with non-glass facades and expected to deliver by mid-2020.
  • D.C.’s waterfront development also continued to gain strong traction. Williams & Connolly signed a 292,000 square feet prelease at The Wharf’s planned Phase 2 development of Parcel 6 and 7. It will join two other Am Law 200 firms—Fish & Richardson and Michael Best & Friedrich. The firm will relocate from 725 12th Street, NW in the East End upon the building completion in 2022.
  • Large tenants dominated leasing activity in 2018. In addition to the aforementioned leases by Fannie Mae and The Whittle School, the federal government executed multiple large leases, many of which being short-term extensions.
  • The legal sector continued the trend of rightsizing during the fourth quarter. DLA Piper and Alston & Bird both renewed and contracted by 10 percent and 32 percent respectively. Winston & Strawn and Beveridge & Diamond preleased space to relocate to new development projects, while shedding a combined 117,000 sq. ft. in the process and contracting by 48 percent and 45 percent respectively.
  • The 10 largest leases in 2018 (3.6 million square feet in aggregate) accounted for 41 percent of total leasing volume. In contrast, the top 10 leases in 2017 (2.2 million square feet in aggregate) accounted for 33 percent of total activity.

Northern Virginia

As space demand continues to strengthen, the Northern Virginia office market posted 152,350 square feet of positive absorption in Q4 2018, bringing the 2018 total to 1.03 million square feet—the highest amount of occupancy gain the market has recorded since 2008’s level of 1.2 million square feet. Other advances from the CBRE report include:

  • After great anticipation, Amazon’s decision to house half of its HQ2 in Crystal City—and the expected creation of 25,000 jobs and 4 million square feet of office space demand—signals a significant impact on the region’s real estate markets and overall economy in the coming years.
  • Investment sales volume ended the year at $2 billion. Foreign capital has become more active in the market, accounting for 33 percent of total investment activity in 2018, up from 14 percent and 15 percent in 2016 and 2017, respectively.

Suburban Maryland

In Q4, the vacancy rate increased in suburban Maryland due to large tenant contractions and move-outs. BAE Systems and two GSA agencies returned a combined 160,000 square feet to the market in Q4 2018, leading to a 10-bps increase in the overall vacancy rate over the previous quarter. Although suburban Maryland posted 11,997 square feet of negative absorption in Q4 2018, becoming the second consecutive quarter with occupancy loss, Montgomery County had 169,016 square feet of occupancy gain in Q4 for a total of 643,776 square feet in 2018. This marked the county’s sixth consecutive quarter with occupancy gains. Other notable findings of the CBRE report include:

  • Development activity was robust in Q4 with one groundbreaking and two deliveries. 2.4 million square feet remains under construction, the highest level ever tracked for Suburban Maryland. New development of trophy buildings in Bethesda has attracted several high-profile users, such as Host Hotels, Booz Allen Hamilton and Orano.
  • The life sciences industry has been 2018’s most significant driver of growth, contributing three leases each over 100,000 square feet, resulting in 216,000 square feet of positive absorption. By contrast, the business services sector and the GSA together posted 227,500 square feet of occupancy loss.
  • Investment sales activity was notably down in 2018 despite Discovery Communications’ $70 million sale of its headquarters building in Silver Spring during the third quarter. Only $116 million traded in Q4 2018.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at