Washington D.C. saw a sharp drop in demand at year end

At the end of 2022, the Washington D.C. office market witnessed a significant cooling in office leasing activity with less than 1.o million square feet (sf) of volume reported in the fourth quarter. Macroeconomic concerns such as persistent recession fears, rising interest rates, and increased use of hybrid workplace strategies have slowed demand despite strong underlying employment fundamentals throughout the year. Just 5.0 million square feet (msf) was transacted in 2022, down from 8.0 msf reported in 2021 and the 7.3 msf reported in 2020. In 2019, prior to the COVID-19 pandemic, annual leasing activity was 9.6 msf. In the largest lease in the fourth quarter, law firm Orrick leased 77,000 square feet (sf) at 2100 Pennsylvania Avenue NW. This is the second consecutive quarter where the largest lease was under 100,000 sf. With office leasing expected to be lower amid continued uncertainty in the economy, Washington D.C. will remain a tenant-favorable office market for the foreseeable future.

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