MARKET SUMMARYWASHINGTON, DC METRO AREA

Cresa Washington DC

1800 M Street, NW, Suite 350 S

Washington, DC 20036

202.628.0300

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TABLE OF CONTENTS

01

02

03

04

05

06

THE TENANT’S PERSPECTIVE

CONSTRUCTION & DELIVERIES

EMPLOYMENT

FEDERAL LEASING

MARKET UPDATE

AREA SNAPSHOT

Cresa provides customized solutions exclusively for corporate

space users by offering fully integrated services that align

their real estate needs with their business plans, delivering

maximum cost savings and exceeding expectations.

OUR MISSION

Information contained herein is provided, in part, from third party sources including:

GMU Center for Regional Analysis, the US Bureau of Labor Statistics and CoStar Group.

Even though obtained from sources deemed reliable, no warranty or representation,

expressed or implied, is made as to the accuracy of the information herein.

01

Office construction is below average as

landlords struggle to backfill existing space.

THE TENANT’S PERSPECTIVE

Employment numbers are mixed. Retail leads

private sector job growth while the Federal

Government continues to shed employees.

Federal lease requirements are capped at

2012 occupancy levels and decreasing.

Tenant-favorable conditions continue in the

Washington Metro region.

Average vacancy rates in DC are at 12.8%.

Suburban MD sits at 18.1% while Northern VA

inches closer to 20% with 19.6% vacancy. Photo Credit: Stocksy.com

2

02

CONSTRUCTION & DELIVERIES

Less than 4 million square feet has delivered in 2014.

The 10-year average for new office construction delivery

annually is 7 million square feet. Pre-leasing is strongest

in Northern Virginia’s submarkets inside the beltway at

62% indicating more speculative development in Northern

Virginia outside of the beltway and Suburban Maryland

where pre-leased rates are under 40%.

8,000

14,000

4,000

2,000

6,000

OFFICE DELIVERIES (SF) BY MARKET

2005 2006 2007 2008 2009 2010 20122011 2014 YTD2013

12,000

10,000

Northern Virginia

Suburban Maryland

Washington DC

10-Yr Average

2M

1.5M

1M

0.5M

DC MD NoVA NoVA

UNDER CONSTRUCTION (PRE-LEASING STATS)

# of Properties Under Construction

Square Feet

% Pre-leased

Square FeetPre-leased

3

Square Feet UC % Pre-leased

8

1,520,966

39%

588,614

11

970,320

43%

414,327

5

1,513,878

62%

931,035

6

932,944

36%

335,860

Washington, DC

Suburban Maryland

NoVA NoVA

39%43%

62%

36%

(Inside Beltway) (Outside Beltway)

(Inside Beltway) (Outside Beltway)

2015

45%

2017

3.7 MILLION SF

SLATED OFFICE SPACE DELIVERY

AVERAGEPRE-LEASED RATE

* for office projects Under Construction in the DC Metro Area

OCCUPANCY RATE: 1812 N MOORE ST

* 1812 N Moore Street is the DC Metro’s largest existing office building that delivered in late 20130 %

2014 MAJOR DELIVERIES

1) 5601 Fishers Lane

2) 14995 Shady Grove Road

3) 7900 Tysons One Place

4) 3001-03 Washington Boulevard

5) 800 10th Street, NW

6) 850 10th Street, NW

7) 655 K Street, NW

14995 Shady Grove Road

North Rockville111,476 Square Feet

15.2% LeasedLL: Lerner Enterprises

7900 Tysons One Place

Tysons Corner528,290 Square Feet

66.9% LeasedLL: Macerich

5601 Fishers Lane

Rockville490,998 Square Feet

100.0% LeasedLL: JBG Companies

3001-03 Washington Blvd

Clarendon/Courthouse302,665 Square Feet

89.6% LeasedLL: Invesco Realty Advisors

800 10th Street, NW

East End293,010 Square Feet

92.5% LeasedLL: Hines

655 K Street, NW

East End287,800 Square Feet

74.8% LeasedLL: Assn. of Am. Med. Colleges

850 10th Street, NW

East End263,994 Square Feet

100.0% LeasedLL: Hines

Photo Credit (1-7): CoStar Group

Photo Credit: © Paul Warchol, warcholphotography.com

EMPLOYMENT

03

The Washington Metro Region is home to a highly educated,

well-paid workforce. 48.2% of the adult population has

at least a Bachelor’s Degree and the median household

income for the region is $88,233 which is among the

highest of the top 25 metro areas.

Job Change: July 2013 - July 2014

80,000

160,000

40,000

20,000

60,000

15 LARGEST JOB MARKETSNew York

120,000

100,000

140,000

Los AngelesChicagoDallasDC HoustonPhiladelphiaBostonAtlantaM

iami

SF-OaklandDetroitSeattleM

inneapolisPhoenix

Ranked by Unemployment Rate June 2014

15 LARGEST JOB MARKETS

6

1.0%

5.0%

9.0%

3.0%

2.0%

4.0%

Minneapolis

7.0%

6.0%

8.0%

SeattleBostonSF-OaklandDC DallasHoustonPhiladelphiaM

iami

PhoenixNew YorkChicagoLos AngelesAtlantaDetroit

US 6.1

28.9 %

FEDERAL EMPLOYMENT

Expected to decline to 28.9% of

total employment by 2018.

11.5 %

TOTAL EMPLOYMENT

By 2022, total employment is

projected to grow by 11.5%.

PROFESSIONAL BUSINESS SERVICES

Professional Business Services is

expected to contribute 48.8% to

job growth through 2018.

03 EMPLOYMENT

TOTAL EMPLOYEES BY INDUSTRY

Job growth in the Washington MSA has been

challenged by the contraction of the federal government.

Any improvement in the job growth rate will have to be

fueled by the private sector.

The Federal Government lost 8,000 jobs in the period

between July 2013 and July 2014. Professional &

Business services, an office-using sector, improved by

adding 2,000 jobs.

With unemployment just over 5%, the Washington

Metro remains under the US average of 6.1% and enjoys

the 5th lowest unemployment rate among the 15 largest

job markets in the country.

20,000

100,000

-40,000

-60,000

-20,000

60,000

40,000

80,000

200220052008

2010 2011 2012 2013 2014

Washington, MSA, 2002-2014

ANNUAL JOB CHANGE

7

July 2013 - July 2014 Washington MSA

JOB CHANGE BY SECTOR

Fed. Gov.

-5-10 5

Educ. & Health Services

Retail

Construction

Other Services

Financial

Information

Manufacturing

Wlse Trade

Prof. & Bus. Services

Leisure & Hosp.

Transportation & Utility

State & Local Gov.

10

Washington, MSA

5,000

25,000

-10,000

-15,000

-5,000

15,000

10,000

20,000

200220052008

2009 2010 2011 2012 2013 2014

Federal GovernmentProf. & Bus. Services

FEDERAL LEASING

04

“Laying the groundwork for the long-term strategy

on government occupied real property, in 2012 the

Administration issued a Freeze the Footprint policy

and directed agencies to freeze the growth in their real

estate inventory.

In early calendar year 2014, the Administration will begin

publicly tracking the Government’s adherence to a fixed

baseline—730.2 million square feet—composed of office

and warehouse space, and agencies will continue to

pursue mobile workforce strategies and tighter internal

controls on space acquisitions.”

(Source: “The President’s Fiscal Year 2015 Budget”)

20,000,000

35,000,000

10,000,000

5,000,000

15,000,000

10-YEAR EXPIRING GOVERMENT LEASES

2014 2015 2016 2017 2018 2019 20212020 20232022

30,000,000

25,000,000

Northern Virginia Suburban Maryland Washington DC

56 Million RSF

96 Million RSF

Source: GSA

DEPARTMENT OF EDUCATION

Current: 502,329

Proposed: 290,000 by FY2015

SELECT GOVERNMENT REDUCTIONS

DEPARTMENT OF JUSTICE

Current: 1,045,000

Proposed: 839,000 by FY2017

FEDERAL BUREAU OF INVESTIGATION (FBI)

Current: 195,676

Proposed: 155,755 by FY2016

20%

42%

20%

8

2012

2013

2014

2015

04 FEDERAL LEASING

Change in USF

PROSPECTUS REQUIREMENTS

Number of Leases

0.4%

11.5%

14.6%

29.3%

6

14

12

3

PROPOSED FEDERAL EFFICIENCY REDUCTION

Current(USF/person)

Proposed(USF/person)

239 1912014 -Prospectus

Leases

9

Photo: © Eric Taylor, EricTaylorPhoto.com

05

MARKET UPDATE

Tenant favorable conditions are expected to continue through

the balance of 2014. There is still plenty of space to backfill

across the region—especially in Northern Virginia and Suburban

Maryland where vacancy rates continue to increase. Federal

employment and space requirements are decreasing so the

region will have to look at the private sector to fuel future growth.

Many jurisdictions around the region are pushing for high-tech

tenants as the DC Metro area looks to move beyond its reliance

on the federal government. Landlords continue to be aggressive

in pursuing tenants and are increasingly willing to buy out existing

lease obligations to attract tenants.

DC

MD

VA

12.4% $ 52.410.8% vs

2013$0.16 vs

2013

18.1% $ 28.731.4% vs

2013$0.31 vs

2013

19.6% $ 32.101.2% vs

2013$0.66 vs

2013

Offfice Vacancy Rates Asking Rents

10

Alexandria

97

28

586

355

355

214

5

4

236

123

123

267

7

270

270

495495

29

1

29

395

395

395

1295

295

95495

495

50

50

66

95

11

$41.55

19.2%

GEORGETOWN

$42.29

8.2%

CAPITOL HILL

$55.48

15.3%

EAST END

$54.51

11.8%

NOMA

$46.97

16.3%

UPTOWN

$40.15

14.8%WEST END

$52.70

10.1%

$51.38

12.4%

CAPITOL RIVERFRONT

$38.63

26.40%

CRYSTAL CITY

CLA

RE

NDO

N/ COURTHOUSE

$42.23

12.0%

$41.12

29.6%

ROSSLYN

$42.28

17.7%

BALLSTON

$32.34

15.0%

ALEXANDRIA

TY

SONS CORNER

$32.79

19.7%

$30.60

17.4%

MERRIFIELD

$28.39

16.0%

FAIRFAX CENTER

RESTON

$28.47

18.8%

$27.29

11.7%

HERNDON

$23.12

23.3%

ROUTE 28 NORTH

$25.03

18.8%

ROUTE 28 SOUTH

GERMANTOWN

$24.67

20.4%

G

AITHERSBURG

$22.58

17.1%

$30.08

20.0%

ROCKVILLE

$30.56

22.4%

NORTH BETHESDA

$36.84

11.2%

BETHESDA

SILVER SPRING

$28.93

11.4%

Rent

Vacancy

AREA OVERVIEW

Photo Credit: Capitolyardsdc.com

CBD

INCREASE

DECREASE

NO CHANGE

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For additional information, please contact Justin Moultrie, Senior Research Manager, at

301.841.6533 or jmoultrie@cresa.com.

Cresa Washington DC

1800 M Street, NW, Suite 350 S

Washington, DC 20036

202.628.0300

2 Bethesda Metro Center, Suite 900

Bethesda, Maryland 20814

301.951.6500

1600 Tysons Boulevard, Suite 800

McLean, VA 22102

571.203.9360

Cresa Baltimore

509 S Exeter Street, Suite 200

Baltimore, Maryland 21202

410.558.6192

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