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DC office sales and leasing have dropped off precipitously in 2016 after a strong 2015, according to Q2 reports.
CBRE's Q2 report showed just five transactions took place in DC, totaling $134M in sales. This is down from $722M in sales in Q1 of this year. As the chart above shows, sales volume had been rising for the last three years to as much as $4.5B in 2015, but the first half of 2016 has failed to reach even a third of that.
Transwestern reported similar numbers in its Q2 report. It showed a total of $853M in District sales for the first half of 2016, which is down from $1.54B in 2015 and $1.63B in 2014.
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Transwestern's research director Elizabeth Norton—snapped above at a Bisnow event earlier this year—attributes this drop in part to the influx of higher-priced Class-A office investment sales during the first half of 2015 that wasn't there during the first half of this year.
CBRE's Revathi Greenwood tells Bisnow this is indicative of a nationwide trend.
"We've seen this drop off happening the whole year," she says. "Pricing is still strong, particularly for trophy assets, but there's a little bit of uncertainty seeping through. It’s taking longer to close deals. We think it’s a sentiment issue more than fundamental changes."
DC's largest sale during the quarter was The Meridian Group buying 1400 L St NW for $70M, more than half the city's total sales volume.
Revathi, pictured above, noted that while DC sales volume is down, Northern Virginia sales are rising, exceeding the District for the first time in five years.
In addition to investment sales, leasing velocity has also slowed. The leasing velocity for the first half of 2016 was 16% below the five-year average of 3.1M SF. Revathi also credits this more to sentiment than fundamental changes.
"That is something that we found surprising, because, economically, the DC area is growing, it's still adding jobs but the leasing activity is kind of treading water," Revathi says. "What’s interesting is we don’t think the fundamentals have changed at all, but because of the uncertainty, people are taking longer to make decisions."
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