- The Washington Times - Sunday, September 7, 2003

Many real estate professionals say the District is the nation’s best and most stable office market, despite a shortage of new tenants and an economy that is not creating new jobs.

The District’s vacancy rate for office space was the lowest of any major city in the nation in the first half of this year, even though most area companies did not expand or add new employees.

Through the first half of this year, the office vacancy rate in the District held steady between 6 percent and 8 percent, considerably lower than any other large city, several real estate companies reported.

“D.C. is proving that it’s probably the strongest office market in the U.S. and possibly internationally as well,” said Mary Peterson, senior vice president at Cassidy and Pinkard, a Washington real estate company.

Unlike most cities, the District benefits from a massive government presence, feeding the office market a steady supply of stable, credit-worthy tenants.

Government agencies rarely default on leases, nor do their contractors, real estate analysts said. Law firms, seeing the advantage of being near activities in Washington, have announced expansion plans.

The Dickstein Shapiro Morin & Oshinsky law firm signed a lease for 420,000 square feet at International Square in June, and Wilmer, Cutler and Pickering announced in February that it would occupy 524,000 square feet at the 1800 block of Pennsylvania Avenue NW.

The District did not have a massive influx of technology tenants in the late 1990s like Northern Virginia, which still struggles with vacancy rates above 16 percent after the sector’s collapse.

Office vacancy rates are an important indicator of a market’s economic health. Low vacancy rates signal that companies in the area are in solid financial shape. Full office buildings provide a high workday population, higher potential revenues for retailers and, by extension, the city.

Reported vacancy rates vary depending on the company calculating the data and whether sublease space — empty space put back on the market by tenants — is included. But even with sublease space, only 8.1 million square feet of the 101.4 million square feet of available space in the District is empty, said Grubb and Ellis, a national real estate services firm.

New York’s borough of Manhattan was the only other office market that showed a vacancy rate of less than 10 percent, Grubb and Ellis said.

New York rebounded from the September 11 terrorist attacks two years ago, which eliminated more than 1 million square feet of office space in Manhattan and sent some companies across the Hudson River in search of space.


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