{"id":1004759356,"date":"2025-06-17T03:40:39","date_gmt":"2025-06-17T11:40:39","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004759356"},"modified":"2025-06-20T01:36:39","modified_gmt":"2025-06-20T09:36:39","slug":"dc-still-an-investment-powerhouse","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/dc-still-an-investment-powerhouse\/","title":{"rendered":"DC Still an Investment Powerhouse"},"content":{"rendered":"\n

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\"Exterior<\/a>
The 10-story Edison Place office building is LEED Gold-certified. Image courtesy of Pepco Holdings<\/em><\/figcaption><\/figure><\/div>\n\n\n

The Washington, D.C.’s office sector continued to show mixed fundamentals, according to the latest CommercialEdge data. The metro\u2019s 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.<\/p>\n\n\n\n

Construction activity remained sluggish, the capital\u2019s pipeline being one of the smallest among gateway markets. However, completions marked a 17.6 percent growth year-over-year.<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

D.C. second in the nation for office sales<\/h2>\n\n\n\n

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.<\/p>\n\n\n\n

Assets traded at an average of $252 per square foot, above the nation\u2019s $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).<\/p>\n\n\n

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\"Exterior<\/a>
The nine-story office property dubbed Victor Building dates back to 1909. Image courtesy of CommercialEdge<\/em><\/figcaption><\/figure><\/div>\n\n\n

The biggest transaction that closed since the start of the year was Exelon’s $175 million acquisition of Edison Place<\/a>, a 364,000-square-foot office building at 701 Ninth St. NW in the city\u2019s central business district. Brookfield Properties sold the property that serves as headquarters for Pepco Holdings, Exelon’s subsidiary.<\/p>\n\n\n\n

The second-largest office deal in the metro, amounting to $153 million, was another Brookfield disposition. In March, the company sold Victor Building<\/a>, 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.<\/p>\n\n\n\n

Vacancy rates on the rise in D.C.<\/h2>\n\n\n
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\"Exterior<\/a>
Midtown Center is a trophy office mid-rise in the city’s Downtown submarket, that features 35,000-square-foot floorplates and 43,851 square feet of retail space. Image courtesy of CommercialEdge<\/em><\/figcaption><\/figure><\/div>\n\n\n

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\u2014 slightly below the national average of 19.7 percent.<\/p>\n\n\n\n

One of the largest leasing deals in the metro was Carr Properties\u2019 117,000-square-foot relocation agreement<\/a> with law firm Freshfields. The long-term commitment includes two full floors at Midtown Center\u2019s West Tower, an 869,000-square-foot, two-building office complex in Washington, D.C.<\/p>\n\n\n\n

Another notable lease signed since the start of 2025 was a 32,000-square-foot deal inked by Comstock Cos.<\/a> 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.<\/p>\n\n\n\n

D.C.\u2019s 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).<\/p>\n\n\n\n

Policies for office-to-residential makeovers<\/h2>\n\n\n\n

In this context, office-to-residential conversions are becoming more attractive as an option for owners with underutilized and vacant buildings. CommercialEdge\u2019s Conversion Feasibility Index<\/a> is a tool that evaluates a building\u2019s potential for a multifamily repurposing by using a set of property-level scores.<\/p>\n\n\n\n

There are various federal and local governments policies<\/a> 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\u2019s 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.<\/p>\n\n\n\n

One example of an office-to-residential conversion in the metro is Foulger-Pratt\u2019s 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.<\/p>\n\n\n\n

Few projects animate D.C.’s office pipeline<\/h2>\n\n\n\n