Washington, D.C. Quarterly Market Report. 1st Quarter lpcwashingtondc.com

Transcription

1 Washington, D.C. Quarterly Market Report 1st Quarter 1

2 Table of Contents Washington, D.C. Leasing & Market Research Metropolitan D.C. Market Overview...3 Washington, D.C. Quarterly Overview...5 Washington D.C. Top Sales... Washington D.C. Top Ten Leases... 9 Market Spotlight, 1Q 1: CBD...1 East End CBD / East End Class A... 1 CBD / East End Class B Southwest... 1 West End / Georgetown Capitol Hill / NoMa...1 Capitol Riverfront Tysons Corner John Marvin Jones Senior Vice President Managing Director jmjones@lpc.com Adam Biberaj Senior Vice President abiberaj@lpc.com Merrill Turnbull Senior Vice President mturnbull@lpc.com Jae Lee Senior Vice President jlee@lpc.com Robert Hines Senior Vice President rhines@lpc.com John Olson Senior Vice President jeolson@lpc.com Terry Amling Senior Vice President tamling@lpc.com Joe Mehok Director of Research jmehok@lpc.com

3 Metropolitan D.C. Market Overview 1st Quarter 1 Overall Market Summary The Washington, DC Metropolitan commercial real estate market is comprised of approximately 1. million square feet of rentable office space located in the District of Columbia, Northern Virginia, and Suburban Maryland. The total vacancy rate decreased to 1.% at the end the first quarter 1, down from 15.% at the end of the fourth quarter 17. The market recorded 371, square feet of net absorption in the first quarter, representing a % decrease from the 5,13 square feet absorbed in the fourth quarter. Leasing activity totaled approximately. million square feet in transactions signed. The largest lease executed was a pre-lease by Fannie Mae for 5, square feet at Reston Gateway, a proposed building in Reston, Virginia. Two buildings, totaling 779,93 square feet, broke ground; bringing the year-to-date 1 construction pipeline total to 9,,9 square feet (% pre-leased). Only one building delivered this quarter; 91 th Street, NW (1, sf, 7% occupied and owned by the DC Bar). There were nineteen sale transactions in the first quarter, totaling $. billion. The largest sale was 9 G Street, NW trading for $1,, ($1,7 psf). This sale set a new record on a price per square-foot basis for the District. Average asking rental rates decreased $.7 to $3.3 per square foot, Full Service. From February 17 - February 1 the DC Metropolitan area had a net increase of, jobs (7,7 private sector, -,9 government) representing 1.% growth, while the unemployment rate remained flat at 3.%. DC VA MD Metro Area (YTD) Direct Vacancy (1Q 1) 1.% 15.1% 1.1% 1.% Total Vacancy (1Q 1) 11.3% 1.% 1.7% 1.% Total Net Absorption (YTD 1) -33,17 7,7 7, 371, SF (YTD 1),,3,1,793 5,1. M SF 3 11 Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

4 Metropolitan D.C. Market Overview 1st Quarter 1 Outlook The Washington, DC Metropolitan market posted a solid start to 1, as total vacancy decreased and the region experienced another quarter of positive net absorption. Northern Virginia outperformed DC and Suburban Maryland in decreasing it s respective total vacancy, positive net absorption, and leasing activity. The sales market continued to be strong as the region totaled approximately $. billion in sales, roughly equal to the $.1 billion in sales volume recorded in the fourth quarter 17. Regional employment experienced 1.% of growth YOY ending February 1, primarily driven by the private sector, specifically the Professional & Business Services industry. The DC Metro area s unemployment rate remained flat at 3.%, outpacing the.1% national average. Projects and trends to keep an eye on in 1 include the upcoming deliveries of Midtown Center and Capitol Crossing and their impact on Washington, DC, as well as, the FBI s decision to stay in the District. In Suburban Maryland, downtown Bethesda is heating up with proposed new developments and the Discovery Channel s former headquarters should attract interest in Silver Spring. Excitement is growing in Northern Virginia as four locations have been short-listed as potential sites for Amazon s second headquarters HQ. Phase II of the Silver Line in Virginia continues to attract interest and new development around it s new metro stations, expect the same to happen as the Purple Line breaks ground in Maryland. 11 Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

5 Washington, D.C. 1st Quarter 1 Market Summary The Washington, DC office market currently consists of 77 buildings, over 5, square feet, totaling approximately 13. million square feet of rentable space. As of February 1, the unemployment rate for the District of Columbia decreased to 5.7%, while the Washington, DC Metropolitan area remained flat at 3.%. The national unemployment rate remained flat at.1%. The DC Metropolitan area gained, net new jobs from February 17-February 1, representing 1.% growth. Professional & Business Services lead the private sector with 1, new jobs; while the Government lost,9. The largest public sector lease executed this quarter was by the GSA - USAID for 3,173 square feet at 5 D Street, SW - National Square in the Southwest submarket. Lincoln Property Company represented the owner, Goddard Investment Group. Wilmer Hale signed the largest private sector lease with a 5,-square-foot pre-lease at 1 Pennsylvania Avenue, NW in the CBD submarket. Direct Vacancy Total Vacancy Net Absorption (SF) Leasing Activity (SF) (SF) U/C Percent Pre-Leased 1Q 1 Q 17 1Q 17 1.% 1.% 1.% 11.3% 1.% 1.9% -33,17 11, 17,.1 M.9 M.3 M 5. M 5. M. M % 57% 9% There were seven sale transactions in DC, totaling $1,,,. The largest sale was 9 G Street, NW trading to Corporacion Masaveu S.A. for $1,, ($1,7 psf). Vacancy Rate (SF) 1, 5,5 $5. $5.5 $51.7 The total vacancy rate in the District increased to 11.3% at the end of the first quarter, totaling approximately 1.3 million square feet of vacant space. The Class A total vacancy rate increased to 1.5% (approx million sf), while Class B total vacancy increased to 11.% (approx. 5.9 million sf). Sales Volume $1. B $1.3 B $ M Unemployment DC Metro Area 3.% 3.% 3.9% Sublet vacancy remained flat at.% at the end of the first quarter, totaling approximately 1.1 million square feet Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

6 Washington, D.C. 1st Quarter 1 Net Absorption & Leasing The Washington, DC market recorded -33,17 square feet of net absorption in the first quarter. This is the first time since first quarter 1 that District has recorded negative net absorption. The 1-year average for net absorption in the District is 1.1 million square feet absorbed per year. Net Absorption Vacancy Rate Contributing to the negative absorption this quarter included the Consumer Financial Protection Bureau vacating 7,3 square feet at 15 Eye Street, NW (moving into federally owned space at 17 G Street, NW). -1 ' '9 '1 '1 Net Absorption '1 '1 The Central Business District (CBD) market posted -, square feet of net absorption in the first quarter. The East End market posted 19,97 square feet of net absorption in the first quarter. A total of,,3 square feet of leases were executed in the first quarter. The 1-year average for leasing activity in DC is 9. million square feet annually. The largest lease executed this quarter was by the GSA - USAID for 3,173 square feet. All other leases in the Top Ten ranged between 5, to 35,9 square feet, with nine of the Top Ten being private sector transactions. ' '9 '1 '1 '1 '1 Fourteen buildings were under construction in Washington, DC at the end of the first quarter, totaling 5,399,37 square feet (% pre-leased). At the end of the quarter, % of the,573,55 square feet under construction in the core markets of the CBD and East End was pre-leased, while the balance of the construction pipeline in DC stood at 53% pre-leased One building broke ground; 5 L Street, NE - Sentinel Square III (539,93 sf, % pre-leased to the FCC). Located in the NoMa submarket, the building is expected to deliver in the second quarter. ' '9 '1 '1 '1 '1 11 Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

7 Washington, D.C. 1st Quarter 1 (cont d) Buildings expected to deliver in 1 include; 99 M St, SE (31, sf, % pre-leased), 1 Maine Ave, SW - The Wharf (5, sf, 5% pre-leased), 11 Pennsylvania Ave, NW (,, 53% preleased), 11 15th St, NW (75, sf, % preleased), 55 New York Ave, NW (75, sf, % pre-leased), 15 M St, NE - Constitution Square IV (93, sf, 1% pre-leased), 1 M St, SE (13, sf, 1% pre-leased) and Massachusetts Ave, NW (,99 sf, 1% pre-leased). Buildings expected to deliver in 19 include; 5 L Enfant Plz, SW (15, sf, 5% pre-leased), 131 Pennsylvania Ave, NW (3,5 sf, % pre-leased), 19 N St, NW (5, sf, 3% pre-leased), 1 K St, NW (15, sf, 1% preleased) and 5 Massachusetts Ave, NW (559,91 sf, % pre-leased). One building delivered in the first quarter 1; 91 th Street, NW (1, sf, 7% occupied and owned by the DC Bar). The 1-year average for new inventory added to the District is 1.5 million square feet per year. Buildings currently under renovation include; Alexander Court, 7 K St, NW, K St, NW, 171 Rhode Island Ave, NW, 111 1th St, NW, 11 L St NW, and 1th St, NW. Sales Volume Sales Volume ($ Billions) ' '9 '1 '1 '1 Vacant Space Available & Vacancy by Class SF Vacant (Millions) 1 1.5% 1 11.% 1 3.% ' (%) of Building Class Vacant Buildings expected to break ground next quarter include; 99 1th St, NW (15,5 sf, % preleased) and 5 M St, NW (3, sf, 7% preleased). A B C Outlook Washington, DC should remain a tenant s market through abundant supply and declining demand. Aggressive landlords continue to offer generous concessions (free rent and TI s) to be competitive. Vacancy is expected to increase as approximately 3. million square feet of new inventory is expected to deliver in 1, of which 3% (or 1. million sf) is still available for lease. Consolidations and downsizing of the federal real estate footprint remain a priority of the GSA Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

8 Washington, D.C. 1st Quarter 1 Washington, D.C. Top Sales 9 G St, NW 11 New York Ave, NW 1771 N St, NW Submarket East End Submarket East End Submarket East End Submarket CBD Date Sold January 1 Date Sold January 1 Date Sold January 1 Date Sold January 1 Price $5,5, ($1,19 psf) Price Buyer Munich RE Seller Clarion Partners Buyer RBA 1,93 SF Seller A RBA 11, SF $1,, ($1,7 PSF) Corporacion Masaveu S.A. ASB Capital Management Price Buyer Seller $1,, ($7 PSF) AXA Investment Managers Minshall Stewart Properties Price Buyer Seller $15,9, ($573 psf) Stream Realty Partners National Association of Broadcasters RBA 11,35 SF Class Class A Leased 1% Class A RBA 59,1 SF Leased 95.% Cap Rate.% Leased 51.9% Class B Cap Rate.3% Cap Rate.% (stab.) Leased 1% Cap Rate N/A Notes NAB will vacate entire building in Q rd St, NW 1 New York Ave, NW 5 E St, SW International Trade Commission Submarket West End Date Sold January 1 Price $1,, ($ PSF) Buyer DivcoWest Seller MetLife, Inc. RBA 3,9 SF Class A Seller Boston Properties Leased 9.7% RBA,959 SF Class A Leased 1% Cap Rate.5% Submarket Southwest Date Sold January 1 Price Buyer $11,5, ($51 PSF) Boyd Watterson Asset Management 111 K St, NE 111 1th St, NW Submarket NoMa Submarket East End Date Sold February 1 Date Sold November 17 Price $1,75, ($5 PSF) Buyer TA Realty Price Buyer $7,5, ($ PSF) Rubenstein Partners Seller New Boston Fund Seller American Realty Advisors RBA,33 SF RBA 1,15 SF Class A Class B Leased 7.5% Leased 91.% Cap Rate N/A Cap Rate.% Notes 9 condos, totaling,33 SF sold 11 Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

9 Washington, D.C. 1st Quarter 1 Top Ten Leases In the first quarter 1 there were eight new leases and two renewals in the Top Ten, including three leases over 1, square feet. The largest lease executed this quarter was in the public sector by the GSA - USAID signing for 3,173 square feet at 5 D Street, SW - National Square. The largest private sector lease was a prelease signed by WilmerHale for 5, square feet at 1 Pennsylvania Avenue, NW. Law firms signing leases this quarter included; WilmerHale, Baker Botts (13,317 sf at Anthem Row), Hogan Lovells (53,75 sf at Columbia Square), and Pepper Hamilton (35,9 sf at K St, NW). Both Baker and Pepper will relocate to properties that have completed significant renovations, while WilmarHale will move into new construction at 1 Pennsylvania Avenue, NW (once the current building is razed and redeveloped). Lincoln Property Company represented the landlord in four of the largest leases of the quarter; including the owners of National Square (in the USAID transaction), Hall of States (NBC News), 99 M Street, SE (IAM), and Portals I (AmeriHealth). The Washington, DC market totaled,,3 square feet of leasing activity in the first quarter; representing approximately 1% of the 9. million square feet of leases signed annually (1-year average). 5 D St, SW National Square th St, NW Columbia Square GSA - USAID Hogan Lovells 3,173 SF 53,75 SF New New / Expansion 1 Pennsylvania Ave, NW WilmerHale 5, SF New / Pre-lease 99 M St, SE IAM National Pension Fund, SF New / Pre-lease 7 & K St, NW Anthem Row 15 Maryland Ave, SW The Portals I Baker Botts AmeriHealth 13,317 SF 39,57 SF New New - N. Capitol St, NW Hall of States NBC News 7,351 SF Renewal / Expansion 11 K St, NW United Mineworkers of America 3, SF Renewal 777 th St, NW K St, NW WeWork Pepper Hamilton 5,7 SF New 35,9 SF New 9 11 Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

10 Market Spotlight CBD 1st Quarter ' '9 '1 '1 '1 '1 Total Net Absorption ' '9 '1 '1 Direct Vacancy Rate '1 '1 Highlights Total vacancy in the CBD market increased to 9.7% at the end of the first quarter, up from 9.% at the end of the fourth quarter. The CBD recorded -, square feet of net absorption in the first quarter, a notable decrease from the,93 square feet absorbed in the fourth quarter. s contributing to the negative net absorption included the Consumer Financial Protection Bureau vacating 7,3 square feet at 15 Eye Street, NW (consolidating offices into federally-owned 17 G Street, NW). Leasing activity decreased to,57 square feet in the first quarter, down from the 7,19 square feet leased in the previous quarter. s executing leases this quarter included WilmerHale pre-leasing 5, square feet at 1 Pennsylvania Avenue, NW, United Mineworkers of America renewing 3, square feet at 11 K Street, NW, and Pepper Hamilton signing for 35,9 square feet at K Street, NW. 1 Year Averages ( - 17) Net Absorption 79, SF / Year 1,91 SF / Year 3. M SF / Year Market Stats Inventory.3 M SF Direct Vacancy.% Total Vacancy 9.7% YTD 1 Absorption -, SF YTD 1,57 SF 59, SF Percent Pre-Leased 55% Three buildings were under construction at the end of the quarter including; 11 Pennsylvania Avenue, NW (, sf, 53% pre-leased), 1 K Street, NW (15, sf, 1% pre-leased), and 19 N Street, NW (5, sf, 3% pre-leased). YTD 1 : $.3 17: $5. SF YTD 1: $ Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

11 Market Spotlight East End 1st Quarter ' '9 '1 '1 '1 '1 Total Net Absorption ' '9 '1 '1 Direct Vacancy Rate '1 '1 Highlights Total vacancy in the East End market decreased to 1.7% at the end of the first quarter, down from 1.% at the end of the fourth quarter. The East End recorded 19,97 square feet of net absorption in the first quarter, an increase from the 15,93 square feet absorbed in the fourth quarter. s contributing to the positive net absorption included Yelp moving into 5,73 square feet at 575 7th Street, NW - Terrell Place and Mindspace moving into 3,59 square feet at 131 K Street, NW - One Franklin Square. Leasing activity increased to, square feet in the first quarter, up from the 7,93 square feet leased in the previous quarter. s executing leases this quarter included Baker Botts signing for 13,317 square feet at 7 K Street, NW, WeWork signing for 5,7 square feet at 777 th Street, NW, and Hogan Lovells signing for 53,75 square feet of expansion space at th Street, NW. Three buildings sold in the East End; 9 G Street, NW sold to Corporacion Masaveu S.A. for $1,, ($1,7 psf), 1 New York Avenue, NW sold to Munich RE for $5,, ($1,19 psf), and 11 New York Avenue sold to AXA Investment Managers for $1,, ($7 psf). 1 Year Averages ( - 17) Net Absorption Market Stats Inventory 9,1 SF / Year 39,97 SF / Year 3.5 M SF / Year.3 M SF Direct Vacancy 11.7% Total Vacancy 1.7% YTD 1 Absorption YTD 1 19,97 SF, SF 1,91,55 SF Percent Pre-Leased 73% YTD 1 : $51. 17: $55.9 1, SF YTD 1: $ Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

12 Market Spotlight CBD / East End Class A 1st Quarter ' '9 '1 '1 '1 '1 Total Net Absorption 1 1 ' '9 '1 '1 Direct Vacancy Rate '1 '1 Highlights Total vacancy in the CBD / East End Class A market remained flat at 13.% at the end of the first quarter. The Class A market recorded 11,7 square feet of net absorption in the first quarter, a decrease from the 5,759 square feet absorbed in the fourth quarter. s contributing to the positive net absorption include Yelp moving into 5,73 square feet at 575 7th Street, NW and Mindspace moving into 3,59 square feet at 131 K Street, NW. Leasing activity totaled 1,39,7 square feet in the first quarter, an increase from the 935,31 square feet leased in the previous quarter. s executing leases include the Information Technology Industry Council for,7 square feet at 7 K Street, NW and McCarter & English for,75 square feet at 131 K Street, NW. Three Class A buildings sold; 9 G Street, NW sold to Corporacion Masaveu S.A. for $1,, ($1,7 psf), 1 New York Avenue, NW sold to Munich RE for $5,, ($1,19 psf), and 11 New York Avenue sold to AXA Investment Managers for $1,, ($7 psf). One building delivered in the first quarter 1; 91 th Street, NW (1, sf, 7% occupied and owned by the DC Bar). 1 Year Averages ( - 17) Net Absorption Market Stats Inventory 31,35 SF / Year 1,19 SF / Year.1 M SF / Year 57.1 M SF Direct Vacancy 1.% Total Vacancy 13.% YTD 1 Absorption YTD 1 11,7 SF 1,39,7 SF,573,55 SF Percent Pre-Leased % YTD 1 : $5.3 17: $57.7 1, SF YTD 1: $ Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

13 Market Spotlight CBD / East End Class B 1st Quarter ' '9 '1 '1 '1 '1 Total Net Absorption ' '9 '1 '1 Direct Vacancy Rate '1 '1 Highlights The vacancy rate in the CBD / East End Class B market increased to.5% and the end of first quarter, up from 7.9% at the end of the fourth quarter. The Class B market continues to out-pace the Class A market in total vacancy;.5% (Class B) vs. 13.% (Class A). Class B buildings recorded a total of -111,97 square feet of net absorption in the first quarter. While net absorption was negative, tenants moving into Class B assets include The Daily Caller taking occupancy of 13,79 square feet of sublease space at 19 L Street, NW. Leasing activity totaled 37,955 square feet in the first quarter, a decrease from the 3,557 square feet leased in the previous quarter. s executing leases include Kelly IP, LLP subleasing 15,9 square feet at 13 19th Street, NW and EOP Group renewing 1,9 square feet at 19 7th Street, NW. One Class B building sold this quarter in the CBD; 1771 N Street, NW sold to Stream Realty Partners from the National Association of Broadcasters for $15,9, ($573 psf). 1 Year Averages ( - 17) Net Absorption Market Stats Inventory -115,5 SF / Year SF / Year. M SF / Year 33.5 M SF Direct Vacancy 7.7% Total Vacancy.5% YTD 1 Absorption YTD 1-111,97 SF 37,955 SF SF Percent Pre-Leased % YTD 1 : $.37 17: $.55 SF YTD 1: $ Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

14 Market Spotlight Southwest 1st Quarter ' '9 '1 '1 '1 '1 Total Net Absorption 3 ' '9 '1 '1 Direct Vacancy Rate '1 '1 Highlights Total vacancy in the Southwest market increased to 13.9% at the end of the first quarter, up from 13.% at the end of the fourth quarter. The Southwest recorded -99,33 square feet of net absorption in the first quarter, a notable decrease from the 1,51 square feet absorbed in the fourth quarter. s contributing to the negative absorption included the Department of State vacating,5 square feet at C Street, SW - Federal Center Plaza II. Leasing activity decreased to 39,93 square feet in the first quarter, down from the 1,1,73 square feet leased in the previous quarter. Leases executed this quarter include the GSA - USAID signing for 3,173 square feet at 5 D Street, SW - National Square and AmeriHealth signing for 39,57 square feet at 15 Maryland Avenue, SW - The Portals I. 5 E Street, SW sold to Boyd Watterson Asset Management from Boston Properties for $11,5, ($51 psf). 1 Year Averages ( - 17) Net Absorption 31, SF / Year 195,7 SF / Year 91,97 SF / Year Market Stats Inventory 11.9 M SF Direct Vacancy 13.% Total Vacancy 13.9% YTD 1 Absorption -99,33 SF YTD 1 39,93 SF 5, SF Percent Pre-Leased 5% YTD 17 SF Two buildings remained under construction at the end of the quarter; 5 L Enfant Plaza, SW (15, sf, 5% pre-leased) and 1 Maine Avenue, SW - The Wharf (5, sf, 5% preleased). : $9.9 17: $5.1 YTD 1: $ Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

15 Market Spotlight West End / Georgetown 1st Quarter ' '9 '1 '1 '1 '1 Total Net Absorption ' '9 '1 '1 Direct Vacancy Rate '1 '1 Highlights Total vacancy in the West End / Georgetown market decreased to 7.3% at the end of the first quarter, down from 7.% at the end of the fourth quarter. The West End / Georgetown recorded -17,73 square feet of net absorption in the first quarter, a notable decrease from the 5,75 square feet absorbed in the fourth quarter. Leasing activity increased to,9 square feet in the first quarter, a slight uptick from the 7,5 square feet leased in the previous quarter. Leases executed this quarter included Council on Foundations signing for 13,5 square feet at 155 3rd Street, NW and Spitfire Strategies signing for 1, square feet at 3 N Street, NW rd Street, NW (in the West End) sold to DivcoWest from MetLife, Inc. for $1,, ($ psf). 1 Year Averages ( - 17) Total Absorption 7,13 SF / Year 5,3 SF / Year 7,7 SF / Year Market Stats Inventory 7. M SF Direct Vacancy.7% Total Vacancy 7.3% YTD 1 Absorption -17,73 SF YTD 1,9 SF SF Percent Pre-Leased % YTD 17 SF 7: $.9 17: $9.1 YTD 1: $ Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

16 Market Spotlight Capitol Hill / NoMa 1st Quarter ' '9 '1 '1 '1 '1 Total Net Absorption ' '9 '1 '1 Direct Vacancy Rate '1 '1 Highlights Total vacancy in the Capitol Hill / NoMa market increased to 1.% at the end of the first quarter, up from 1.% at the end of the fourth quarter. 1 Year Averages ( - 17) Net Absorption 1, SF / Year,73 SF / Year Capitol Hill / NoMa recorded -13,9 square feet of net absorption in the first quarter, down from the 71,77 absorbed in the fourth quarter. Contributing to the negative net absorption included the DC Water & Sewer Authority vacating 1,3 square feet at 1 1st Street, NE. Market Stats Inventory 1. M SF / Year 1. M SF Leasing activity decreased to 157,3 square feet in the first quarter, down from the 373,9 square feet leased in the previous quarter. Leases executed this quarter include NBC News renewing and expanding into 7,351 square feet at - N. Capitol Street, NW, Samsung signing for 3, square feet at 7 Pennsylvania Avenue, SE, and the International Budget Partnership signing for 1,3 square feet at 75 1st Street, NE. 111 K Street, NE sold to Rubenstein Partners from New Boston Fund for $7,5, ($ psf). 5 L Street, NE - Sentinel Square III broke ground. This 539,93-square-foot building is currently % pre-leased to the Federal Communications Commission and expected to deliver in the second quarter. Direct Vacancy 11.9% Total Vacancy 1.% YTD 1 Absorption YTD 1-13,9 SF 157,3 SF 1,999, SF Percent Pre-Leased 5% YTD 1 : $. 17: $53. SF YTD 1: $ Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD

17 Market Spotlight Capitol Riverfront 1st Quarter ' '9 '1 '1 '1 '1 Total Net Absorption ' '9 '1 '1 Direct Vacancy Rate '1 '1 Highlights Total vacancy in the Capitol Riverfront market decreased to 5.9% at the end of the first quarter, down from.% at the end of the fourth quarter. The Capitol Riverfront recorded,75 square feet of net absorption in the first quarter, a slight uptick from the,9 square feet absorbed in the fourth quarter. s contributing to the positive net absorption included the DC Board of Elections moving into 19, square feet at 115 Half Street, SE. Leasing activity increased to 17,51 square feet in the first quarter, up from the 5,59 square feet leased in the previous quarter. s executing leases this quarter include IAM National Pension Fund pre-leasing, square feet at 99 M Street, SE, Unity Health Care signing for 3,553 square feet at 11 New Jersey Avenue, SE, and Systems Planning & Analysis renewing, square feet at M Street, SE. Two buildings are currently under construction in the Capitol Riverfront; 99 M Street, SE (31, sf, % pre-leased) and 1 M Street, SE (13, sf, 1% pre-leased). 1 Year Averages ( - 17) Net Absorption Market Stats Inventory 91,1 SF / Year 91,317 SF / Year, SF / Year 3. M SF Direct Vacancy 5.3% Total Vacancy 5.9% YTD 1 Absorption YTD 1,75 SF 17,51 SF 31, SF Percent Pre-Leased 5% YTD 17 : $5. 17: $9.9 SF YTD 1: $ Constitution Ave., Suite 35 East Washington, DC Wilson Blvd., Suite Arlington, VA Woodmont Ave., Suite 5 Bethesda, MD