Sorry DC Landlords, It's Still a Tenants' Market
November 28, 2011
By: Erika Morphy

For a brief period this year--that time when spring is heading into the summer--it appeared as though the fine run tenants enjoyed in the DC area office market was ending and the pendulum was swinging back in the landlord’s favor. Unfortunately, if you blinked you missed it. That pendulum has slammed back to the tenants’ camp, Studley’s EVP David Lipson and research director Christian Volney, tells GlobeSt.com.

“People were thinking that rents would rise as construction increased and the economy improved,” Lipson says. “All of that, however, is tied to the economy, and we know what happened there.” ...

... Concessions are beginning to rise again, he continues, in terms of allowances and free rent. “They are also taking other forms, such as increased flexibility and expansion rights. For instance, they are asking for, and receiving, the right to give back a floor in year 6 of a ten-year lease. That can be much more valuable to a tenant than an extra $20 per square foot in TI.” ...

... “Buildings that have recently traded at top-of-market pricing may find it difficult to compete for tenants in terms of rental rates--yield assumptions will be high at new buildings,” Volney says. ...

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