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DC Metro Office Sales Cool Down in Q2

| Commercial Real Estate News, Deals, Market Reports, Office| Views: 548


Executive Summary

The Washington, D.C., office sales market started the year in full force, with more than $2 billion worth of properties changing hands in the first three months of 2017. The following quarter didn’t manage to rise to the same level, with sales volume dropping by more than $1 billion, according to data gathered by Yardi Matrix. Yet with the average price per square foot on the rise and a history of quarterly volume fluctuations, the market might gain back traction over the following months.

Sales Volume Drops by More Than $1B from Q1 to Q2

After a strong start to the year in Q1, the D.C. office market took a significant breather in Q2. Total sales volume dropped 47% from one quarter to the next, resting at $1.2 billion, with 3.8 million square feet traded. Even though the dollar volume climbed 32% year-over-year in the second quarter of 2017, Q2 2016 was one of the market’s weakest quarters and well below the average of the past five years. Nonetheless, the drop in both sales volume and total square footage should be no cause for concern, given the way the market has fluctuated in the past. Even with significant drops during the past five years, the market seems to always bounce back, and Q4 2016 and Q1 2017 both recorded more than $2.3 billion in quarterly sales volume.

Average Price per Square Foot Trends Slightly Upwards in Q2

After a series of ups and downs throughout 2016, the average price for office buildings trading on the market closed Q2 2017 at $339 per square foot. Though falling below the five-year average and well below the Q3 2013 peak of $538 per square foot, average prices in the D.C. metro rose 7% year-over-year and 13% compared to Q1 2017.

Morgan Stanley Seals the Largest Deal of Q2 in DC

A total of 18 major office transactions closed during Q2 2017, totaling $1.2 billion in sales volume and 3.8 million square feet of space. Investors focused their attention on more affordable options, with 11 Class B and 7 Class A properties trading during the past three months.

The largest office deal of Q2 was the $460 million sale of Waterview, a 647,243-square-foot Class A office high-rise in Arlington, Va. The 24-story, LEED Gold-certified building was acquired by Morgan Stanley from the Paramount Group in May, for $710.71 per square foot. Located at 1919 North Lynn Street in the Rosslyn submarket, the glass-clad property includes 901 parking spaces and 5,535 square feet of retail space.

The Colorado Building, Washington, D.C. (Yardi Matrix)

The Colorado Building, Washington, D.C. (Yardi Matrix)

The second-largest transaction of the quarter was Unizo Holdings’ $259 million acquisition of 1325 & 1341 G Street NW in Washington, D.C. The Japan-based company bought the two buildings from Westbrook Partners and TIER REIT in April, in a portfolio deal. The 307,705-square-foot, 10-story high-rise at 1325 G Street NW was built in 1969 and completely renovated in 1997. The asset is managed by JLL and is LEED Gold certified. Located at 1341 G Street NW, The Colorado Building dates back to 1903 and underwent cosmetic renovation work in 1989, 2002 and 2017. The historic East End building is also managed by JLL and incorporates 132,714 square feet of space.

Over 2 Million Square Feet on Track for Q3 Delivery

The year’s second quarter saw two large office developments come online in Washington, D.C. Douglas Development’s 241,873-square-foot Uline Arena at 1140 3rd Street NE was finalized in early June, while Buchanan Partners finished work on its 72,500-square-foot BerkleyNet Center @ Innovation Park, at 9301 Innovation Drive in Manassas, Va., in May.

The next quarter looks even more promising for the Washington, D.C., office market, as eight major projects totaling 2.1 million square feet are scheduled for completion in Q3. USAA’s 695,817-square-foot National Science Foundation Headquarters is the largest office development currently underway, and is expected to come online by the end of August. Located at 2401 Eisenhower Ave. in Alexandria, Va., the 19-story high-rise is already LEED Silver-certified and includes 22,175 square feet of retail space.

2000 K Street (via Yardi Matrix)

2000 K Street (via Yardi Matrix)

Another big office project in the Q3 pipeline is the 235,259-square-foot mid-rise at 2000 K Street in the Washington, D.C., central business district. Spearheaded by Tishman Speyer, the 12-story spec project includes more than 13,000 square feet of retail space and is expected to earn LEED Gold certification. The development will also benefit from exposure on K Street NW and U.S. Route 29, according to Yardi Matrix data.


  • Data source: Yardi Matrix (download raw data);
  • Square footage parameters: over 50,000 square feet;
  • Minimum amount per transaction: $5,000,000;
  • Transactions recorded until July 19th, 2017;
  • We excluded ‘ownership stake,’ ‘ground lease,’ ‘controlling interest’ and ‘portfolio’ deals from our calculation of the average price per square foot.

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