How The Presidential Election Affects DC's Office Market
With an office market still heavily reliant on the federal government and its contractors, the quadrennial uncertainty over who will lead the government can have a noticeable effect on DC's office leasing. This year especially, office owners say the election has had a slowing effect on leasing velocity as companies anticipate the decision the nation will make on Nov. 8.
Next Thursday, with less than a month remaining, the election will be a topic of discussion among industry leaders at Bisnow's DC State of Office event at 7:30am at Franklin Court, 1099 14th St NW.
Looking back at past election years, Brookfield EVP Greg Meyer, who will speak at the event, says they have typically been slow years in the DC office leasing market, and he says this year's Q3 has shown the same trend.
"In the first half of the year, things were really accelerating nicely, now they've slowed down a bit," Greg, on the left with director of leasing Dave Bevirt, says. "With the way the election is going, there’s a lot less certainty than people thought there was six months ago. I think that’s important in this market for people making business decisions."
In the past quarter, which just ended Sept. 30, DC saw negative absorption for the first time in seven quarters, according to CBRE's Q3 market report. Transwestern's report showed the same thing, with a net absorption of negative 88k SF in the District and vacancy ticking up 10 basis points to 9.1%.
While office markets across the country are impacted by the economic cycle, which rises and falls regardless of who sits in the Oval Office, the DC area is singularly affected by government spending decisions in which presidents have a major role. Over the past few decades, government spending has been on an upward trajectory, and Greg wouldn't expect that to change in a Clinton or a Trump administration.
"I don’t think spending is going to decrease," Greg says. "It’s a question of sort of what are the priorities of one versus the other, where does the money get spent."
Carr Properties CEO Oliver Carr agrees, saying he would expect a Republican administration to put more money into defense and a Democratic president to devote more resources to healthcare. He says these industries have more of a presence in NoVa and Maryland's suburbs than in the District, where the office market is concentrated with law firms and associations.
"Which way the government leans," Oliver, who will also speak at the State of Office event, says, "could have an impact on spending that could affect those markets."
Oliver says he wouldn't expect much of an impact outside of those two industries, and since most of Carr's office buildings are downtown, he hasn't heard much talk from his tenants about the election.
Luckily for Oliver, Fannie Mae's future is well secured. Carr recently signed the financial services agency to one of the largest leases in DC history, a 752k SF HQ at Midtown Center. We snapped Oliver celebrating the groundbreaking of the $680M project with Mayor Muriel Bowser and Councilman Jack Evans in May. He says construction is on schedule and the first phase should deliver by the end of 2017, with the remainder coming mid-2018.
Carr is also working on the 940k SF redevelopment of Bethesda's Apex building, above the western terminus of the upcoming Purple Line. Despite a recent judge's ruling allowing the state to recalculate ridership projections, Oliver says he has been given no indication that Purple Line construction will be delayed. He expects to break ground on the Apex Building project in early 2017.
You can hear more from Greg, Oliver and our other all-star panelists at our DC State of Office event on Oct. 13.