Georgetown-Uptown Submarkets Q4 2018

Georgetown-Uptown Submarket Cluster

Georgetown Submarket Overview

Stable demand and a dearth of supply helped vacancies decline for years, bringing them well below the metro average. After peaking at about 12% after the recession, they are now in the single digits. But weakening demand over the past year and a half has led to a slight uptick in vacancies. The last delivery here was in 2006, and no projects are under construction. In addition to a lack of developable land, the Historic Preservation Review Board and local Advisory Neighborhood Commissions make building in the Georgetown Submarket difficult.

Nonetheless, rent growth has slowed recently and was negative through the first three quarters of 2018. A handful of buildings in the heart of the submarket generally trade here each year. At about $68 million, volume in 2017 was roughly a third of that in 2016. But sales skyrocketed this year, almost entirely due to one transaction—Global Holdings Group’s $415 million purchase of Washington Harbour, a 561,000-SF, mixed-use building on the Georgetown waterfront.

Uptown Submarket Overview

The vast majority of office space in the Uptown Submarket is in its southeastern portion, near Dupont Circle, Logan Circle, and Adams Morgan. In fact, the area bounded by Rock Creek Park, Irving Street NW, North Capital Street, and P Street NW contains about 40% of the submarket’s stock.

Demand has been relatively flat, but because of a lack of supply, vacancies have remained well below the metro average over the course of the cycle, despite a significant tenant move-out in 2014 that spiked vacancies considerably. Rent growth has slowed since 2014, and rents had declined this year as of mid- October. This has kept office rents in Uptown below those in neighboring D.C. submarkets like Georgetown, West End, CBD, and East End. Nonetheless, sales took off in 2016, reaching $280 million due in large part to the sale of Fannie Mae’s headquarters. Volume in 2017 was much lower—at just over $100 million, it was well below the average of the past few years. Sales this year seem on pace to drop again, with just over $50 million recorded as of mid-October.

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