Strong leasing activity from the federal government continued to drive Washington, D.C’s office leasing market in the first quarter of 2011. In response, the availability of prime office space in areas traditionally favored by government agencies — such as the Southwest and NoMa (short for North of Massachusetts) — are declining to historically low levels, according to a report released Monday by international commercial real estate services firm Studley.
While demand from Uncle Sam has remained strong, the private sector’s appetite for space remains sluggish. According to Studley, the District’s availability rate has changed little from the fourth quarter, declining less than one percent in the first quarter to 11.3 percent. In the Central Business District (CBD) and East End — home to many of the city’s private-sector companies — rates have remained nearly static during the past several quarters. For instance, the CBD’s availability rate, currently at 13.5 percent is among the highest of any area in the District. ...
... The future outlook is less certain. “If government leasing activity slows, the District will need to rely on a broad-based recovery in the private sector to support the commercial real estate market,” said Studley Executive Vice President Tom Fulcher. “While substantial changes to spending and entitlement programs will be unlikely to affect the market until after the 2012 election, we will experience a bit of a lull in the number of large tenants with lease rollovers in the next several years which could impede rent growth and limit demand for new space.”
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