DC Still an Investment Powerhouse

The Washington, D.C.’s office sector continued to show mixed fundamentals, according to the latest CommercialEdge data. The metro’s investment activity recorded a 8.5 percent year-over-year increase as of April, placing the nation’s capital in the second spot in the U.S. for office sales once again.

Construction activity remained sluggish, the capital’s pipeline being one of the smallest among gateway markets. However, completions marked a 17.6 percent growth year-over-year.

Meanwhile, the office vacancy rate saw a 230-basis-point increase over the 12-month period ending in April, driving owners to consider selling or redeveloping underperforming properties. Alternative solutions such as repositioning or converting to multifamily were also in the mix.

D.C. second in the nation for office sales

D.C.’s office investment volume reached $1.4 billion, up 8.5 percent year-over-year, with 41 properties totaling 7.2 million square feet having changed ownership. The sales placed the metro on the second spot in the U.S. once again. Manhattan remained the national leader, with nearly $2.6 billion in deals.

Assets traded at an average of $252 per square foot, above the nation’s $191 figure. Among gateway markets, Manhattan remained the leader in office prices, with $439 per square foot, followed by San Francisco ($325 per square foot), Los Angeles ($298 per square foot) and Miami ($259 per square foot). The nation’s capital landed on the fifth spot, while the lowest sale prices were recorded in Chicago ($62 per square foot).

The biggest transaction that closed since the start of the year was Exelon’s $175 million acquisition of Edison Place, a 364,000-square-foot office building at 701 Ninth St. NW in the city’s central business district. Brookfield Properties sold the property that serves as headquarters for Pepco Holdings, Exelon’s subsidiary.

The second-largest office deal in the metro, amounting to $153 million, was another Brookfield disposition. In March, the company sold Victor Building, a 316,000-square-foot property at 750 Ninth St. NW, to Rockwood Capital. The seller used the proceeds to pay off the remainder of a $155.6 million loan issued in 2015; the buyer secured a $113.4 million acquisition loan from Deutsche Pfandbriefbank AG of Garching, Germany.

Vacancy rates on the rise in D.C.

With high vacancies hitting most key markets, the metro’s rate grew 230 basis points over a 12-month period ending in April and reached 19.2 percent— slightly below the national average of 19.7 percent.

One of the largest leasing deals in the metro was Carr Properties’ 117,000-square-foot relocation agreement with law firm Freshfields. The long-term commitment includes two full floors at Midtown Center’s West Tower, an 869,000-square-foot, two-building office complex in Washington, D.C.

Another notable lease signed since the start of 2025 was a 32,000-square-foot deal inked by Comstock Cos. at 1906 Reston Metro Plaza, a 150,000-square-foot tower within the Reston Station mixed-use project in Reston, Va. The tenant is commercial property insurance company FM Global.

D.C.’s rate was higher than those of Los Angeles (16 percent) and Manhattan (16.2 percent). Miami posted the lowest rate, at 15.5 percent, while San Francisco recorded the highest value in the nation (29 percent).

Policies for office-to-residential makeovers

In this context, office-to-residential conversions are becoming more attractive as an option for owners with underutilized and vacant buildings. CommercialEdge’s Conversion Feasibility Index is a tool that evaluates a building’s potential for a multifamily repurposing by using a set of property-level scores.

There are various federal and local governments policies and programs that support conversions projects across the nation. In Washington, D.C., some policies include the Housing-in-Downtown program, an initiative allowing a 20-year tax abatement for commercial-to-residential conversions that is expected to bring 15,000 new residents in the city’s downtown area. Additionally, the Office-to-Anything program, that provides a 15-year temporary tax freeze, is a completion to the HID program intended for commercial, entertainment or retail conversions.

One example of an office-to-residential conversion in the metro is Foulger-Pratt’s redevelopment of the former Department of Justice building. With Clark Construction as general contractor, the historic 13-story office building at 1425 New York Ave. NW will be repurposed intro Accolade, a luxury residential property that will include 243 units. Construction already began and delivery is scheduled for this fall.

Few projects animate D.C.’s office pipeline

As of April, Washington, D.C.’s under-construction pipeline included 1.2 million square feet of office space across five properties, representing 0.3 percent of existing stock—below the national average of 0.7 percent and on par with Manhattan’s and Chicago’s figures. Across gateway markets, Boston led with 2.1 percent of stock.

When adding planned office developments, the index reached 3.6 percent, above the national value of 2.5 percent and on the fourth spot among gateway markets. Boston occupied the first position once again, with 7.3 percent.

Construction activity remained slow, with the capital’s pipeline below most gateway markets, except Seattle (814,824 square feet) and Chicago (809,168 square feet). San Francisco led for pipeline size (3.2 million square feet), followed by Los Angeles (1.9 million square feet).

The largest office project underway in the nation’s capital remains 600 Fifth St. NW. Rockefeller Group and Stonebridge topped out the nearly 400,000-square-foot property last May and completion is expected during this year’s last quarter.

The 322,000-square-foot 1800 Reston Row is the second-largest office project under construction in D.C. Developed by Comstock Cos., the property is part of Reston Row District, a four-building complex within Reston Station—one of the largest mixed-use projects in the metro, expected to become Fairfax County’s main urban hub.

There were no construction starts during the first four months of the year, CommercialEdge data shows, while office completions included three projects encompassing 511,864 square feet. The figure marked a 17.6 percent year-over-year growth in deliveries.

The largest project that came online is Academic Building One, a 298,864-square-foot property within Virginia Tech Innovation Campus. Located at 3625 Potomac Ave. in Alexandria, Va., the office and R&D facility was completed in January within the upcoming education, research and technology campus developed by The Virginia Tech Foundation.

D.C. coworking sector keeps steady

The capital’s coworking sector comprised 6.6 million square feet across 286 locations as of April. Manhattan remained the gateway metro with the largest flex office footprint (11.3 million square feet), while D.C. outperformed Boston (5.3 million square feet) and San Francisco (3.5 million square feet).

The share of coworking space as a percentage of total leasable office space reached 1.7 percent in Washington, D.C.—below the national average of 2 percent and the lowest across gateway markets. Miami led the rankings with 3.8 percent.

The flex office provider with the largest footprint in the metro is Navigate, with locations totaling 584,976 square feet. The top 5 coworking operators also includes WeWork (557,171 square feet), Regus (547,013 square feet), Industrious (508,332 square feet) and Spaces (453,864 square feet).