5.3M 7.3M 6.8M 7.6M 4.8M 5.1M 4.8M 5.4M 6.7M 7.5M 1.8M 2.6M 2.7M 2.3M 2.2M 1.6M 1.5M 1.9M 2.5M 1.8M • DC demonstrated resilience amid turbulent news headlines, with net absorption improving 400,000 s.f. year-over-year and vacancy declining by 200,000 s.f. • Market polarization intensified in 2025. Trophy properties achieved record $93 p.s.f. rents with 12% vacancy, while Class C buildings struggled with 27% vacancy rates. • New federal policies had mixed impacts on the DC office market. RTO mandates drove up attendance rates and daily foot traffic, but the government consolidated its footprint by 2.1 million s.f. in 2025, and several nonprofits shed space as well. Washington, D.C. (CBD) Office Market Trends The DC market saw slight softening in 2025 but continues along a healthy recovery trajectory when correcting for one-off impacts. Absorption fell to -400,000 s.f. after two consecutive years of occupancy gains, but much of this came from over 2 million s.f. of government footprint consolidations, most of which were concentrated in the CBD. Overall vacancy increased 80 basis points year-over-year to 21.7%, a historical high. Despite the reversal in momentum in the CBD, the broader Washington, DC market saw absorption improve year-over-year. The market bifurcation driven by intense flight to quality widened further in 2025. DC’s rent bifurcation is intensified by secular industry trends wherein high-end tenants including law firms and lobbyists have been extremely active and aggressive in recent years, while traditionally pricesensitive tenants, including government and nonprofits, have softened considerably during the new administration. Trophy asking rents hit $93 p.s.f. full service, with achieved rents in new buildings reaching $125-$135 p.s.f. and Trophy vacancy fell below 11%. Conversely, Class C vacancy deteriorated to 27%, with 41% of total vacancy concentrated in the market’s bottom 10% of buildings. Trophy properties in the CBD are still slated to continue benefitting from flight to quality, as the CBD has the third-highest availability of trophy space, behind Capitol Hill and East End. Outlook The Washington, DC CBD still faces headwinds from ongoing downsizing of government agencies, but much of that impact was felt in the first half of 2025, with footprints stabilizing towards the end of the year. The professional services sector, particularly law firms, is driving strong momentum for Trophy spaces, but this is becoming exceedingly rare in the past 18 months. Some developers are seeking new development or redevelopment opportunities for well-located corner assets, but the broader Class A market should continue to see stabilizing occupancy and accretive rent growth as supply-demand dynamics are imbalanced for the foreseeable future. MUST's Submarkets Overall Market Statistics Forecast 2025 net absorption (s.f.) -1,219,558 Under construction (s.f.) 400,000 Total vacancy (%) 21.0% Sublease vacancy (s.f.) 1,038,750 Asking rent (US$ p.s.f.) US$58.96 Concessions Stable Net Absorption and Overall Vacancy Rates Gross Leasing Activity Rental Rates and Going-in yields CBD Class A cap rate (%) Cap rate Asking rent 1.0 0.5 0.0 -0.5 -1.0 -1.5 8% 7% 6% 5% 4% 3% 25% 20% 15% 10% 5% 0% $80 $75 $70 $65 $60 $55 $50 2010 2014 2018 2012 2016 2020 2022 2024 DC CBD Rest of Market 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Net absorption (m.s.f.) Total vacancy (%) / 45 / MANULIFE US REIT
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