As availability in D.C.'s top-tier office market tightens down to a pinpoint, there is a high price to pay for tenants that want the little premium product that remains.
:quality(75))
Trophy rents on signed office leases in D.C. rose 9.3% over the 12 months ending March 31, according to CBRE's first-quarter market data. That is on top of a 9.1% increase over the prior year.
The CBRE report categorizes this trend as “outpacing the long-term average growth rate” for the trophy segment.
D.C. office tenants are now paying an average of $105 per SF for the city’s 14M SF of trophy space, up from $96 per SF this time last year, according to data provided by CBRE.
Meanwhile, achieved rents for Class-A office leases declined by 2% year-over-year, averaging $59.98 per SF, while achieved Class-A-plus rents increased by 2.2% to an average of $76.52 per SF.
The trophy pricing comes as tenants, specifically law firms, are battling for the scarce upper-echelon space still available in the city. Trophy vacancy stands at 10.6%, according to CBRE, compared to the 22.6% across all segments of D.C.'s office market.
And there is virtually no new trophy supply in the city's pipeline. BXP has two 300K SF office buildings planned, one near Metro Center and another in the West End, and together they are 81% preleased to law firms.
Available information on rental rates for individual leases is scant. But for BXP’s prelease with Sidley Austin for 240K SF, one of the highest-profile trophy deals of the year, the rental rate was around $100 per SF, several local market sources told Bisnow in December.
:quality(75))
New trophy office deals last quarter included the Washington Commanders’ 60K SF lease at BXP’s 2200 Pennsylvania Ave. NW and pharmaceutical company Bristol Myers Squibb’s 22K SF lease at 250 Massachusetts Ave. NW, one of the Capitol Crossing towers.
Law firms are traditionally big drivers of rental rates, and demand from that sector appeared to be healthy going into the second quarter. There are at least a dozen law firms in the market seeking 25K SF or more, according to Savills’ Q1 report.
Because trophy rents are reaching record levels, they are also pushing up rents on the tier just below. “Higher-quality or recently renovated” Class-A buildings have recorded a 5%-plus rent growth, CBRE’s report says, “as tenant demand spills over from the Prime segment.”
Eagle Cliff Real Estate Partners co-founder Paul Teti told Bisnow he is seeing the spillover effect seep into his firm’s D.C. properties.
The New York-based firm last week purchased a 300K SF office building near Georgetown that was renovated in 2019, and it bought a 2016-era office property just behind Union Station in 2023.
“Based on our experience and based on the dynamic that is occurring in trophy rents, we think that Class-A rents and overall economics will continue to improve in D.C. over the course of ’26, ’27, ’28,” he said.
)
)
)
)
)
)
)
)
)
)
)
)