“For the first three quarters of 2019, coworking was really driving a lot of that demand, and with the news of WeWork’s failed IPO, coworking growth really slowed across all companies, not just WeWork.” Savills also recorded a decline in D.C.’s leasing pace last quarter that it attributes in part to a coworking slowdown.
JLL Senior Research Director Michael Hartnett also saw stagnant new demand for D.C. office space that he attributed to coworking providers hitting the brakes.
“Since 2015, coworking has driven 45% of D.C.’s occupancy growth; that’s a tremendous number,” Hartnett said.
“What we’ve seen is a complete slowdown in that. They’ve reached 2.8% of D.C.’s occupancy and I think it’s capped at that, and we’re beginning to see the leasing activity slow down.” Hartnett also said the District’s office market has been hurt by a lack of large companies moving into the city.
JBG Smith’s 271K SF building at 1900 N St. NW delivered with 73% occupancy, according to NKF. Courtesy of Newmark Knight Frank An NKF graph showing the rising vacancy rate in the Washington, D.C., office market.
These deliveries contributed to a rise in D.C.’s vacancy rate from 13.7% in Q4 to 14.2% at year-end, according to NKF. “It was a slower quarter for leasing overall, and when you add in the deliveries, it’s a pretty significant uptick in the vacancy rate,” Schneider said.
CBRE also recorded rising office vacancy in Q4, with the District’s vacancy rate reaching an all-time high of 13.9%. The firm found D.C. experienced negative absorption of 17K SF during Q4. “The vacancy rate is the highest on record for D.C., largely due to a large building that delivered 100% vacant,” CBRE Senior Manager Wei Xie said.