Why Nonprofits Are Shrinking More Than Most In D.C. Office Market

Nonprofits have always made up a key piece of the D.C. office market puzzle, taking space in the nation's capital to be close to the seat of government and the city's network of prominent decision-makers. 

But in today’s office environment, as many sectors are reducing their footprints, nonprofits are among those with the most to gain and least to lose from cutting space.

Nonprofit leasing volume in the D.C. metro during 2024 totaled 1.3M SF, 18% below the historic average and less than in nine of the last 10 years, according to CBRE data. Nonprofits make up 7% of the area's total office market, and they totaled 12% of all leasing activity in D.C. proper last year. 

CBRE’s definition of nonprofits includes trade associations and think tanks, which tend to be slightly more reliant on office space, while the mission-driven nonprofits, or 501(c)(3)s, are more likely to be flexible with cutting back on space to serve their overall mission, brokers in the nonprofit space told Bisnow.

“For a lot of organizations in that [501(c)(3)] space, there is a bigger reliance on cost savings, and they're often more flexible around working from home, and so that's where you may see a greater reduction in the amount of space and the change in how space is being used,” Bradley Wilner, an executive vice president at CBRE and a member of the brokerage's nonprofit practice, told Bisnow. 

These organizations face financial pressure from workforce shortages and high costs for goods and labor, so as hybrid work has become normalized, office space has become an easy line item to cut back on, Beth Gazley, an Indiana University professor who studies nonprofit management, told Bisnow. This has led nonprofits to reduce the size of their offices and, in some cases, get rid of them altogether, creating a headwind for demand in D.C.'s weak office market. 

“The pandemic made everybody face this necessity of remote work, but then it became an opportunity in the minds of the nonprofit sector, who were budget cutting, and an opportunity to offer flex work,” Gazley said.

Earlier this month, hunger relief organization Share Our Strength cut its footprint by more than half when it inked a 16K SF lease at 1401 Massachusetts Ave. NW. The property, a redevelopment of a three-story building connected to a historic church, delivered last year. 

The firm is relocating from 1030 15th St. NW, a building across from Midtown Center, where it has 35K SF, a Transwestern spokesperson told Bisnow.

Children’s Law Center also signed a deal this month to downsize with its move to Capitol Crossing at 250 Massachusetts Ave. NW. The organization plans to move into 15,600 SF in November, down from its 20,800 SF at 501 Third St. NW, Avison Young principal Jonathan Danziger told Bisnow.

Like much of the private sector, many nonprofits are shifting to smaller, flexible spaces with more shared space and fewer individual offices and workstations. When it comes to how much space they are cutting, brokers said nonprofits are being more aggressive than other industries. 

“I would say that I see more footprint reduction among nonprofits,” said Cushman & Wakefield Executive Managing Director Aaron Pomerantz, who works primarily with nonprofits and associations in the District. 

The amount of space nonprofits lose when they sign new leases varies from organization to organization, depending on their needs.

“A lot have gone down by one-half,” Savills Executive Managing Director Wendy Feldman Block said. “I’ve got some that went down by half, some went down by two-thirds. I just got hired by a foundation that probably will go down by a third, and they’re big.”

D.C.-area nonprofits also tend to relocate more often than tenants in other sectors as they downsize and upgrade, according to CBRE's November nonprofit report. It found that while relocations made up 52% of the leases across all sectors, 62% of nonprofit leases were relocations.

In extreme cases, nonprofits are getting rid of nearly all of their office space and opting to have employees come in just for gathering opportunities. 

“I have clients that have gone fully remote,” Pomerantz said. 

He had a client with several hundred employees — which he declined to name — that “by their prepandemic standards” would have needed around 70K SF to 80K SF. 

But in a switch to nearly fully remote work, it leased 5K SF to serve as meeting space only.

“They built no office space,” he said. “They built only ‘we space,’ spaces where they can have their teams come together and meet and strategize and they collaborate.”

And it's not just that one organization. Many nonprofits are using leased space solely for meetings or other collaborative efforts, Wilner said.

D.C.-based nonprofit crowdfunding platform GlobalGiving has gone nearly completely remote, CEO Victoria Vrana told The Chronicle of Philanthropy. 

She said GlobalGiving has “no plans” to ever enact a return-to-office mandate, due to the benefits remote work affords her employees. 

The organization is located at One Thomas Circle, a 238K SF office building owned by a partnership of LaSalle Investment Management and a Bavarian pension fund. GlobalGiving signed a 16K SF lease on the eighth floor in 2020. Now, the office space is largely unused, Vrana told the Chronicle, and the organization is looking for a sublease tenant.

Gazley expects more nonprofits to take office space to the chopping block as they deal with the slew of pressures headed their way and, at the same time, try to protect their workforce and mission. 

“One thing I think we can predict with a lot of confidence this year is that the kinds of nonprofits out there that are really facing these inflationary pressures are going to be working really, really, really hard to cut costs where they can,” Gazley said. “And they might even go back to offering more remote work to people as a result, because they can't afford the rent.” 

Employers nationwide have shifted their expectations of in-person work — although some workplaces even now are returning to five-day in-office schedules, including the federal government. But nonprofits have been especially keen on keeping pandemic-led hybrid work norms. 

“The nonprofit sector, even the direct service organizations, have really normalized remote work,” Gazley said. “I'm seeing it everywhere.” 

For these organizations, which are already facing a labor shortage, providing their employees flexibility on where they work is a critical means of attracting and retaining talent. While they may not be able to offer the same pay and benefits as their private sector peers like law firms or financial institutions, flexibility is a cost-free — and often cost-saving — bonus. 

“I think they see it as a benefit that they can offer,” Gazley said.

Difficulty hiring, as well as economic challenges like the elevated costs of goods and labor, are trends that are expected to continue into 2025, according to the Dorothy A. Johnson Center for Philanthropy.

“Looking to 2025, the forecast reflects an ongoing interplay of economic constraints and talent shortages,” according to the center’s report on philanthropy trends.

The challenged environment means that downsizing and offloading space is more crucial than ever for nonprofits to stay afloat.

“For some organizations, ditching the office can help ease financial strain,” National Council of Nonprofits CEO Rick Cohen told The Chronicle of Philanthropy this month. 

“There are a lot of groups that are looking at potentially needing to close their doors,” he added, noting that the money saved can go toward the mission instead.

While some nonprofits that lease their offices are reducing or getting rid of space, others that own their buildings are shifting into the leasing market. 

“We're seeing a lot of organizations trying to figure out how to get out of the real estate ownership game,” Pomerantz said.

CBRE provided Bisnow with a list of 11 District nonprofits that have put owned space up for sale. 

One is the Legal Services Corp., which put its 70K SF Georgetown headquarters at 3333 K St. NW on the market in September after downsizing into leased space the year before.

The publicly funded nonprofit, established by Congress in 1974, is the largest funder of civil legal aid in the country. It swapped its Georgetown headquarters for a 38K SF lease at Tishman Speyer’s International Square in October 2023, taking the entire eighth floor of the blocklong property for the next 15 years. 

LSC didn't respond to Bisnow's request for an interview.

The American Center for Physics sold its College Park headquarters building and moved into leased space last year. The center, which is made up of three physics organizations, offloaded the 107K SF 1 Physics Ellipse building for $35.5M, with plans to lease back some of the footprint. It also took 30K SF in downtown D.C. at 555 12th St. the year prior. 

“They wanted to be in the city,” Feldman Block told Bisnow. “They wanted to be close to things.”

The organizations most likely to sell their headquarters and lease instead are those with older, small to midsized buildings, brokers told Bisnow. 

“A lot of the product that's out there, it's sort of older, antiquated,” Wilner said. “You think about some of the smaller buildings with small floor plates, stack design, it just doesn't accommodate the modern workplace as well as being on one full floor, as an example.”

Leased space allows nonprofits more flexibility to expand or contract in the future. It also rids them of the time, effort and money they need to maintain and modernize properties, offloading that responsibility to landlords who can provide more modern amenities to lure employees back to the office when they do need to come in.

For those that own multilevel office buildings, organizations can feel that it inconveniently spreads out the few employees that are there. Moving to leased space on one floor, as Legal Services Corp. did, can provide more cohesion, brokers said. 

“We're seeing a lot of organizations realize that it doesn't make sense to be on five floors or three floors or four floors,” Pomerantz said. “If you're going to have people in two days, three days a week, you can have much more of a blank canvas with modern office space.” 

“So we are seeing a good number of organizations trying to think this out,” he added.

Not everyone considering selling has made the jump to the market yet. 

They have to first be sure of their space usage, and some nonprofits just aren’t there yet, Feldman Block said. She added that because office buildings are taking longer to sell and their values have declined, not all organizations are rushing to market. 

But the conversations are happening.

“I will tell you that most nonprofits that own their building, a lot of them have been evaluating: should they keep owning it?” she said.