DC Tenants Stay Put
Cushman & Wakefield Mid-Atlantic research manager Sarah Dreyer (snapped this morning) tells us that with landlords offering "astronomical" concession packages—including up to a year of free rent and over $100/SF in tenant improvement allowances, in some long-term class A deals. "Every quarter, concessions hit peak levels, but then they peak again," says Sarah, "and it's not just new deals, concessions for renewals continue to climb." She cites the recent re-ups by law firms O'Mulveny & Myers, Morgan Lewis, and White & Case as evidence that landlords can hold on to anchors, if the right package is offered.
O'Melveney was able to completely re-stack its footprint at Brookfield's 1625 Eye Street, taking vacant space on the building's top floor, which was almost equal to moving into a completely new space, Sarah says: "Almost everything they would normally move to a new building for, they got." Firms with an eye on reducing footprints have been able to do so in existing spaces too, she adds, so owners with newer, adequately efficient buildings are positioned well to retain big tenants despite the construction and delivery of new office product.
C&W is putting out its Q3 research stats today, and Sarah tells us another big takeaway for the DC region is ongoing sluggish job growth, even as unemployment continues to fall nationwide. There have been modest gains in the private sector, she says (largely in non-office using fields like education and hospitality and leisure), but those gains aren't big enough to offset the meager growth of the public sector. If Congress can align itself after next month's midterms, more legislation could be passed, a good sign for DC real estate since more jobs could be created as a result and more federal office space is needed. GSA leasing activity has been improving, she says, aided by several high-profile—you guessed it—renewals in Q3, including the Federal Energy Regulatory Commission and Department of Justice re-upping for 500k SF and 300k SF, respectively.