In today’s Washington Post Dana Hedgpeth presents an account of the grim outlook for the office market in the D.C. area. She reports that, in a slump likely to continue into next year, vacancy rates are increasing, rents are in decline and few new buildings have started construction.
As of yesterday, the vacancy rate for the District and the close-in suburbs was up to 12.5 percent from 11.1 percent at the end of the second quarter last year, according to CoStar Group, a real estate research firm. Rents were down to $33.47 a square foot from $34.55. Few new buildings have broken ground, as credit markets remain extremely tight.
“Unless they’re already in the ground, they’re not starting,” said Steven A. Levin, managing director at Spaulding & Slye. “Any development project needing a loan over $25 million requires multiple lenders, and the guarantees are onerous. The amount of money you can borrow is also reduced.”
This does not bode well for planned office projects for K Street within the Triangle such as Mount Vernon Place, Square 483 from Steuart Investment and Douglas Development’s plans for Squares 450 & 451.
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