Top 5 Best Markets to Build Office Space in the Washington, D.C. Area

Proposed City Place Office Tower via Petrie Ross Ventures
Proposed City Place Office Tower via Petrie Ross Ventures

We recently released an article about the Top 5 Worst Markets for Office Space in the D.C. area. Those areas had the highest vacancy rates in the Washington, D.C. area according to a Transwestern report.

Demand for Class-C and Class-B office space is at near all-time lows and at the same time tenants are adamant about leasing Class-A office space. In some sub markets the demand is so great that Class-A office space available is now below 1 percent.

The Best areas to build Class-A office space in the region (listed below) not only had low Class-A vacancies but also lower Class-B and C vacancies than the rest of the region. 

#5. Gaithersburg, Maryland

Some might think of Gaithersburg as a bit far out and suburban but the city has at least some heavy weights in its borders, including Medimmune – which used to be the 8th largest biotech in the world before AstraZeneca purchased it in 2007 – and the U.S. headquarters of Sodexo, the firm anchors the blue, glass tower in Gaithersburg’s Washingtonian Center. A growing  group of biotechnology companies has also relocated to the city. We are surprised it made the list due to the city approving projects that are way too heavy on the residential side. For example the new 180 acre Crown Farm development currently under construction will have no office space but coins itself as “smart urban living”. By the inundation of residential activity, one would think there is no market for office space but the numbers say otherwise.

·         Direct Vacancy Rate Q4 2013: 4.5%

·         Vacancy Rate with Sublet Q4 2013: 5.0%

·         Under Construction: 0 square feet

·         Net Absorption

o   2010: 123,000 square feet

o   2011: 24,000 square feet

o   2012: 17,000 square feet

o   2013: 2,000 square feet

#4. Laurel, Maryland

I guess you could consider laurel an “emerging office market”, it barely meets the threshold of a cumulative 2.5 million square feet of office space within its bounds and that’s why it’s number four. But the area is close to the terminus of the Intercounty Connector (ICC) which was promised a huge town center by Konterra Realty (that includes a lot of office space) if the ICC was built. Years later we’re still waiting. For now I guess we’ll have to continue to be content with the cool Washington Suburban Sanitary Commission office tower.

·         Direct Vacancy Rate Q4 2013: 0.0%

·         Vacancy Rate with Sublet Q4 2013: 1.9%

·         Under Construction: 0 square feet

·         Net Absorption

o   2010: 0 square feet

o   2011: 0 square feet

o   2012: 0 square feet

o   2013: 0 square feet

 

#3. West End, Washington, D.C.

Defined as the area east of Rock Creek, west of 22nd Street, north of Constitution Avenue and south of N Street (according to Transwestern), it’s also west of the White House and at the cusp of Georgetown. The area is anchored by George Washington University and Hospital and is a solid office market basically in the center of it all, but has space constraints for new office space. One of the biggest renewals in the area happened there in the first quarter of 2013; when Patton Bogs signed a new lease for 206,000 square feet at 2550 M Street, NW.

·         Direct Vacancy Rate Q4 2013: 2.0%

·         Vacancy Rate with Sublet Q4 2013: 2.0%

·         Under Construction: 0 square feet

·         Net Absorption

o   2010: 0 square feet

o   2011: 405,000 square feet

o   2012: 5,000 square feet

o   2013: 14,000 square feet

 

#2. Silver Spring, Maryland

Silver Spring has an astonishing 0.6 percent of Class-A office space available, the equivalent of 4,671 square feet. The amount is miniscule even for the smallest of businesses.

Experiencing one of the most dramatic turnarounds for an urban district in the nation, Silver Spring is now the epicenter of media in the D.C. area. It’s the home of Discovery Communications – one of the top five largest companies in the D.C. area – as well as other related organizations like (but not limited to) Radio One, American Film Institute (AFI) and an exclusive-to-the-region music hall called the Fillmore Silver Spring. The area can also rightfully claim to be a jack-of-all-trades holding the headquarters one of largest biotechnology companies in the region, United Therapeutics.

Despite the very low vacancy and total rentable area, business relocations and expansions, developers have been reluctant to build new office space in Silver Spring.

·         Direct Vacancy Rate Q4 2013: 0.6%

·         Vacancy Rate with Sublet Q4 2013: 3.0%

·         Under Construction: 0square feet

·         Net Absorption

o   2010: (-39,000) square feet

o   2011: 256,000 square feet

o   2012: 37,000 square feet

o   2013: 134,000 square feet

 

#1. Uptown, Washington, D.C.

Uptown has to be one of the top three most active spots for development in D.C. 14th street, NW is lined with construction on both sides (albeit mostly residential). The area is anchored by Howard University, and the infamous U-Street corridor, close by is an all-new office building as a component of the Progression Place development, right over the Shaw metro station. 1525 14th Street is another rare new office building in this sector of D.C. which has been leased as expansion center for Whitman-Walker Health.

·         Direct Vacancy Rate Q4 2013: 0.5%

·         Vacancy Rate with Sublet Q4 2013: 0.5%

·         Under Construction: 0square feet

·         Net Absorption

o   2010: 12,000 square feet

o   2011: 136,000 square feet

o   2012: 54,000 square feet

o   2013: 48,000 square feet

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