• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
DC Metro Office Forecast
 

DC Metro Office Forecast

on

  • 184 views

DC Metro Office Forecast 2012-2014

DC Metro Office Forecast 2012-2014

Statistics

Views

Total Views
184
Views on SlideShare
184
Embed Views
0

Actions

Likes
0
Downloads
0
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    DC Metro Office Forecast DC Metro Office Forecast Document Transcript

    • Metro Forecast Report Washington, DC Office Sector August 2012 Actual Forecast 2006 2007 2008 2009 2010 2011 2012 2013 2014Office SectorTotal Employment (000s) c 42.5 23.0 15.5 -36.5 10.6 32.6 20.0 33.1 42.0Office-Using Employment (000s) c 17.5 8.9 8.2 -0.3 20.7 11.1 12.5 13.2 16.8Net Absorption (sf, mil) 6.5 4.2 1.1 -2.3 5.7 1.2 -0.4 2.2 3.3Vacancy 9.1% 9.7% 11.2% 13.9% 13.0% 13.0% 14.4% 14.7% 14.6%New Deliveries (sf, mil) 8.9 7.9 7.6 9.9 4.0 1.3 2.8 3.6 3.6Asking Rents $33 $35 $35 $35 $34 $35 $36 $37 $38Effective Rents (1) $28 $30 $30 $29 $29 $30 $29 $30 $31Investment Sales ($vol, bil) $14.1 $12.5 $12.5 $2.3 $4.3 $7.2 $5.4 $6.8 $8.4 Sources: REIS, Cassidy Turley Research (1) c = change, year over yearDC Region: A Long, Hot SummerWith record temperatures and drought conditions across much of the OutlookU.S., the economy appears to have taken a breather for the summer.On a national level, real gross domestic product (GDP) has been • Absorption in the Washington DC Metro will total negative 360,000disappointing. GDP slowed to an annual growth rate of 1.5% (SAAR) square feet in 2012, driven mostly by BRAC relocations and slowin the second quarter of 2012 after posting a 4.1% growth rate in the private sector growth. We will likely see improvement post-electionsfourth quarter of 2011 and 2.0% in the first quarter of 2012. Consumer in 2013, especially in the private sector.confidence is down from its peak in February of this year due to volatilityin the global financial markets coupled with political uncertainty in the • Delivery of new office space will remain low over the next 2 years.U.S. Deliveries in 2012 and 2013 combined will total 6.4 million square feet. This compares to the average 7.9 million square feetDespite the lack of energy in the national economy, employment has delivered annually to the market over each of the past 10 years.been relatively strong in the Washington DC region. From June 2011 toJune 2012, the region has gained over 45,000 non-farm payrolls. This • Look for regional office vacancy to peak at 14.7% in 2013 asrelatively healthy level of job creation begs the question: why has the BRAC move-outs taper off and the private sector begins to recoveroffice sector been so sluggish? One of the reasons is that most of the job and absorb more office space.creation was in sectors that are not primary users of office space. Thelargest employment gains were in the Education & Health and Leisure • After a hurried pace of activity in 2011, office investment sales will& Hospitality sectors. The Professional & Business Services sector – a revert back to historical norms in 2012, totaling $5.4 billion for thekey user of office space – gained 5,100 jobs in the 12 month-period Washington DC Metro.through June 2012. That is about one-third of the historical average.The Federal Government downsized by 4,900 payrolls – the equivalent of • Although asking rents are forecasted to inch up, effective rents1.3% of the regional federal workforce – during the same timeframe. We (face rents minus TI’s and free rent) are expected to remainexpect limited private sector hiring and federal government downsizing to essentially flat in most submarkets through 2013. Softeningcontinue through the beginning of 2013. demand in the short-term coupled with high vacancy (4 percentage points above the norm) in most markets will continueDecelerating growth in office-using employment coupled with sluggish to keep effective rents essentially where they are for the next 12 tooffice demand means we have revised our office forecasts compared 18 months.to those issued at the beginning of 2012. Much of the uncertaintysurrounding federal elections in November and upcoming sequestration • We are anxiously awaiting the outcomes of the national electionsmeasures continue to create clouds of uncertainty in the markets. While and the full implications of sequestration. Although we do notCongress approved only a few prospectuses, GSA office leasing activity expect federal spending in the Washington region to fall off theremained dormant. The private sector cautiously signed leases, and fated “fiscal cliff,” we do expect tension to remain in the officemany times for less space than their current leases reflect and for shorter markets over the next 12 months. This all makes for a long, hottime periods. Additionally, BRAC-related vacancies have taken their toll summer, and an anxiety-ridden autumn.on some Northern Virginia markets. 1 Updated August 2012
    • Metro Forecast Report Washington, DC Office Sector August 2012The District: Office Market Forecast Actual Forecast 2008 2009 2010 2011 2012 2013 2014VacancyCBD 8.8% 12.2% 12.7% 12.5% 12.8% 12.7% 12.5%EE 7.5% 9.3% 9.2% 9.4% 10.3% 10.8% 9.7%Capitol Hill 1.4% 10.4% 8.4% 5.0% 5.3% 6.4% 5.7%NoMA 10.6% 13.1% 14.4% 10.6% 10.5% 13.3% 11.1%Southwest 6.2% 18.5% 7.4% 6.9% 6.7% 6.0% 6.3%Capitol Riverfront/SE 6.6% 13.3% 8.1% 17.2% 18.5% 15.4% 15.1%Uptown 5.7% 7.1% 10.2% 9.3% 11.2% 12.1% 11.8%West End/Georgetown 11.7% 12.8% 9.5% 11.3% 10.2% 9.9% 9.6%District 7.8% 11.7% 10.4% 10.4% 11.0% 11.3% 10.6%Net AbsorptionCBD (205,000) (171,000) 125,000 456,000 124,000 155,000 227,000EE 527,000 (466,000) 312,000 (181,000) (278,000) 253,000 429,000Capitol Hill (7,000) (137,000) 238,000 169,000 184,000 47,000 128,000NoMA 209,000 512,000 1,101,000 403,000 13,000 275,000 398,000Southwest 317,000 318,000 1,953,000 14,000 (2,000) 104,000 196,000Capitol Riverfront/SE 86,000 224,000 183,000 40,000 (24,000) 119,000 220,000Uptown (57,000) (139,000) (240,000) (11,000) (18,000) 25,000 20,000West End/Georgetown (66,000) (26,000) 195,000 (91,000) 2,000 15,000 20,000District 804,000 115,000 3,867,000 799,000 1,000 993,000 1,638,000Asking Rents ($)CBD $48 $48 $49 $49 $50 $51 $53EE $50 $50 $52 $53 $52 $53 $55Capitol Hill $45 $47 $53 $56 $54 $55 $57NoMA $46 $45 $48 $47 $45 $45 $46Southwest $49 $49 $51 $51 $49 $50 $52Capitol Riverfront/SE $45 $44 $46 $47 $47 $48 $49Uptown $37 $37 $36 $37 $38 $38 $39West End/Georgetown $44 $42 $42 $43 $44 $45 $46District $48 $48 $49 $50 $50 $51 $53 2
    • Metro Forecast Report Washington, DC Office Sector August 2012Northern Virginia: Office Market Forecast Actual Forecast 2008 2009 2010 2011 2012 2013 2014VacancyAlexandria 7.3% 12.4% 12.3% 13.2% 18.0% 17.2% 20.1%Arlington 1.4% 10.4% 8.4% 10.6% 19.3% 23.0% 23.0%Tysons Corner 12.3% 16.3% 16.6% 16.6% 16.7% 16.0% 18.1%Reston/Herndon 16.1% 16.9% 16.0% 14.9% 14.9% 13.9% 13.3%50/66 14.3% 17.1% 15.5% 14.5% 13.9% 13.2% 12.4%Route 28 S 18.3% 19.5% 17.4% 15.5% 14.9% 15.0% 14.7%Springfield/Newington* 6.1% 8.6% 7.9% 14.0% 13.0% 13.0% 10.2%Loudoun 16.7% 19.1% 17.0% 17.1% 18.2% 16.8% 16.2%Northern Virginia 12.9% 14.8% 14.0% 14.2% 16.6% 16.8% 17.3%Net AbsorptionAlexandria 242,000 (276,000) 140,000 (140,000) (212,000) 149,000 (509,000)Arlington (7,000) (137,000) 238,000 (617,000) (1,243,000) (610,000) 136,000Tysons Corner (120,000) (843,000) (89,000) 48,000 (1,000) 188,000 283,000Reston/Herndon 267,000 (94,000) 255,000 51,000 52,000 302,000 362,00050/66 (801,000) (611,000) 310,000 116,000 123,000 129,000 160,000Route 28 S 383,000 (378,000) 260,000 515,000 188,000 198,000 246,000Springfield/Newington* 132,000 64,000 26,000 (78,000) 180,000 98,000 141,000Loudoun 90,000 73,000 362,000 (131,000) (25,000) 161,000 262,000Northern Virginia 186,000 (2,202,000) 1,502,000 (236,000) (938,000) 615,000 1,081,000Asking Rents ($)Alexandria $33 $33 $33 $32 $32 $32 $31Arlington $34 $37 $39 $40 $41 $41 $41Tysons Corner $31 $29 $29 $30 $30 $30 $31Reston/Herndon $31 $29 $27 $27 $28 $28 $2950/66 $29 $28 $29 $28 $27 $28 $29Route 28 S $28 $26 $26 $26 $26 $26 $27Springfield/Newington $26 $25 $27 $29 $29 $29 $31Loudoun $25 $25 $24 $24 $24 $24 $25Northern Virginia $31 $30 $30 $30 $30 $31 $32* Source: CoStar 2008-2011 3
    • Metro Forecast Report Washington, DC Office Sector August 2012Suburban Maryland: Office Market Forecast Actual Forecast 2008 2009 2010 2011 2012 2013 2014VacancyBethesda/Chevy Chase 6.7% 10.5% 9.9% 9.5% 10.7% 9.6% 9.7%North Bethesda 12.5% 14.8% 13.7% 14.1% 13.8% 17.4% 21.5%Rockville 11.3% 16.0% 14.5% 14.2% 13.9% 14.1% 14.0%North Rockville 13.5% 16.0% 17.1% 14.7% 13.9% 13.0% 11.7%Gaithersburg/Germantown 17.9% 17.7% 14.2% 15.3% 15.1% 16.0% 14.6%Silver Spring 9.3% 11.5% 12.7% 12.0% 11.9% 11.6% 10.7%Prince Georges County 17.8% 18.8% 19.6% 21.0% 22.3% 22.2% 21.9%Suburban Maryland 12.9% 15.4% 15.2% 15.1% 15.4% 15.6% 15.6%Net AbsorptionBethesda/Chevy Chase (17,000) (162,000) 32,000 60,000 79,000 131,000 184,000North Bethesda (131,000) (238,000) 87,000 92,000 393,000 (360,000) (402,000)Rockville (7,000) (137,000) 238,000 (74,000) (5,000) 156,000 396,000North Rockville 22,000 110,000 (191,000) 442,000 92,000 590,000 144,000Gaithersburg/Germantown (164,000) 29,000 209,000 105,000 12,000 76,000 97,000Silver Spring (165,000) (36,000) (25,000) 62,000 27,000 20,000 72,000Prince Georges County (494,000) (359,000) (133,000) (135,000) (19,000) 25,000 45,000Suburban Maryland (956,000) (793,000) 217,000 552,000 579,000 638,000 536,000Asking Rents ($)Bethesda/Chevy Chase $37 $36 $34 $35 $36 $38 $39North Bethesda $32 $32 $30 $30 $30 $30 $30Rockville $33 $29 $30 $31 $30 $31 $32North Rockville $28 $27 $28 $27 $26 $26 $27Gaithersburg/Germantown $24 $24 $24 $23 $23 $24 $24Silver Spring $28 $28 $27 $28 $27 $27 $28Prince Georges County $23 $22 $21 $21 $21 $21 $21Suburban Maryland $28 $27 $26 $27 $27 $28 $28 4
    • Metro Forecast Report Washington, DC Office Sector August 2012 Disclaimer Vacancy Rate: The amount of unoccupied space The information contained in this report was (new, relet, and sublet) expressed as a percentageContact Information obtained from sources deemed reliable, but no warranty or representation is made to the of total inventory. (Total Unoccupied Space divided by Total Inventory.) accuracy thereof. The figures provided forResearchers’ Information: the current quarter are preliminary, and all Absorption: The net change in occupied space information contained in the report is subject between two points in time. (Total occupied space to correction of errors and revisions based on in the previous quarter minus total occupiedCassidy Turley additional data received. space in the present quarter, quoted on a net, not gross, basis.)Jeffrey Kottmeier MethodologyDirector of Research Market statistics are calculated from a base New Space Absorption: The net change in2101 L Street, NW building inventory made up of office properties occupied new space between two quarters.Suite 700 deemed to be competitive in the typical Relet/Sublet Absorption: The net change inWashington, DC 20037 Washington, DC office market. Generally, owner- occupied relet and sublet space between twoTel: 202-463-2100 occupied and federally-owned buildings are not quarters. included. Single-tenant buildings and privately-Washington, DC owned buildings in which the federal government Total Absorption: The net change in total leases space are included. Older buildings unfitUrmi Joshi occupied (new, relet, and sublet) space between for occupancy or ones that require substantialSenior Research Analyst two quarters. renovation before tenancy are generally not2101 L Street, NW included in the competitive inventory. VacantSuite 700 space is defined as space that is availableWashington, DC 20037 immediately or three months (90 days) after theTel: 202-463-2100  end of the quarter. Sublet space still occupied by the tenant is not counted as available space.Northern VirginiaColin Hartley Explanation of Terms Total Inventory: The total amount of office spaceMarket Analyst (in buildings greater than 10,000 square feet) that2101 L Street, NW can be rented by a third party.Suite 700Washington, DC 20037 New Space Available: First generation, never-Tel: 202-463-2100 occupied office space in newly constructed or substantially renovated buildings, being activelySuburban Maryland marketed by a landlord.Philip Brannigan Relet Space Available: Second-generation,Market Analyst unoccupied office space being actively marketed2101 L Street, NW by a landlord. (Space that is marketed but largelySuite 700 occupied is not counted as available space.)Washington, DC 20037Tel: 202-463-2100 Sublet Space Available: Second-generation, unoccupied space being actively marketed by a tenant. (Sublet space that is marketed but still occupied is not counted as available space.) Total Space Available: The sums of new, relet,*All metro forecasts generated by Cassidy Turley and sublet space that is unoccupied and beingNational Research actively marketed. 5