Washington, D.C.’s office market showed renewed leasing momentum in the second quarter, with several large law firm transactions helping to reverse a slower start to the year, according to a recent report by Colliers. The pickup in activity comes as the market continues to work through elevated vacancy and a changing inventory base.
Colliers reports that overall vacancy in the District increased slightly to 21.3% during the quarter, but characterized the rate as largely stabilized. That steadier backdrop reflects the impact of limited new supply, demolitions, and ongoing office-to-residential conversions, all of which are gradually reducing the amount of older office product in the market.
On the demand side, Q2 leasing was led by large private sector and government deals. The largest private sector lease of the quarter was completed at 1701 Pennsylvania NW, underscoring continued interest in well-located buildings even as tenants reassess their space needs. In the public sector, the United States Department of Agriculture executed the quarter’s largest federal lease, downsizing its footprint at 355 E Street SW to 86,409 square feet.
As leasing activity improved, asking rents continued to edge higher. Colliers notes that overall asking rents in Washington, D.C. rose to $56.09 per square foot in the second quarter. Class A space saw even stronger pricing, with average asking rents increasing to $60.02 per square foot, indicating that higher-quality assets are maintaining rate strength despite broader vacancy challenges.
On the supply side, the market logged no new office building deliveries for the second consecutive quarter. At the same time, nearly 150,000 square feet of obsolete office inventory was removed, either through demolition or redevelopment. Colliers highlights that office-to-residential conversions and other redevelopment efforts are playing a significant role in shrinking the pool of aging space and supporting a more balanced long-term outlook for the District’s office sector.
Taken together, the combination of renewed leasing activity, rising asking rents, and the absence of new supply points to a Washington, D.C. office market that is adjusting through both demand and supply channels. While vacancy remains high by historical standards, the report suggests that structural changes to the inventory base, along with selective large leases from both private and federal tenants, are contributing to a gradual stabilization of fundamentals.
