Studley: DC is Still a Tenant Town
March 11, 2014

Tom Fulcher

According to a new report by Jones Lang LaSalle, which we will be covering tomorrow, the nation's office markets are shifting over to the landlord's side of the spectrum, with the move expected to be complete by 2016. That includes Washington DC, which typically commands high office rents. In recent years, of course, landlords have been far more accommodating. spoke with Studley's David Lipson and Tom Fulcher to see if the report is, from their perspective, accurate. In a word, they say, no-at least not for the DC area.

"We are not seeing anything that suggests a landlord market is coming," Fulcher tells "There is not a significant supply of construction in the pipeline and just about every tenant in the market is looking to get smaller."

Certainly there will be demand for well-located buildings, he adds, "but tenants moving into these properties are leaving behind a lot of space that can accommodate lower rents," he says.

Lipson goes so far as to suggest the only talk about a coming landlord's market comes from, well, landlord representatives. "They are the only ones generating this talk for obvious reasons," he says.

Both Lipson and Fulcher tell of a current client they are representing that is seeking 100,000 square feet of office space in the District at the moment. "They have a lot of options," they flatly say.

"And when that tenant moves it will leave behind 120,000 square feet," Lipson adds. Of course, there is some new supply entering the market and interestingly enough it is spec space-which does suggest a landlord community that feels confident of future rents. But Lipson and Fulcher note other trends that say otherwise.

"What we are seeing is landlords willing to entertain longer-term extensions earlier, with five or six years to go, because don’t anticipate improvement in the rental market," Fulcher says.

The well-priced investment office sales also aren’t doing landlord market proponents any favors, Lipson adds. "What happens is these buildings are still trading at high numbers that have been underwritten on rents that are not market reality. The new owner then wants to rent at these rates and the space stays vacant until the landlord becomes more realistic."

Studley: DC is Still a Tenant Town

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