The Strength of Washington, D.C.'s Office Market

NNN Lease Market News

The strength of Washington, D.C.'s office market, which has lifted the values of some properties to boom-era levels, also has helped busted developments in the nation's capital.

"Where does the development derive its value? It's generally from its lease," says Joseph Fuszard, head of commercial real-estate workouts for Bank of America.

Workout experts say that in strong commercial markets such as Washington, as well as New York, Miami and San Francisco, banks increasingly are making the decision to commit to seeing commercial projects through to the end, even if that means increasing funding.
"I'd imagine we're going to see more sponsors making decisions where they might put capital into the asset in order to continue to improve it, to enhance value because they see the market coming back," says Peter Nicoletti, head of special asset services for global real-estate brokerage Jones Lang LaSalle Inc.
In addition to having a guaranteed end user and solid prospects for strong future cash flows, the NOAA project got a push from the fact that it was the pet project of U.S. Sen. Barbara Mikulski, a Democrat from Maryland, who has long championed NOAA's weather research and earmarked federal funds for the agency.
The Washington office market is one of the country's healthiest, in part due to demand from government agencies and contractors. According to researcher Reis Inc., demand is slowing, but tenants are expected to occupy one million square feet more of office space this year.

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