Washington, D.C. Quarterly Market Report. 2nd Quarter lpcwashingtondc.com

Transcription

1 Washington, D.C. Quarterly Market Report

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, Q 17: 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 Elaine Clancy Senior Vice President eclancy@lpc.com Geoff Kieffer Senior Vice President gkieffer@lpc.com Adam Biberaj Senior Vice President abiberaj@lpc.com Robert Hines Senior Vice President rhines@lpc.com Merrill Turnbell Senior Vice President mturnbell@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 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 increased to 15.% in the second quarter, up from 15.% at the end of the first quarter. The market recorded -51,5 square feet of net absorption in the second quarter, a notable drop from the 1,395,1 square feet absorbed in the first quarter. Leasing activity totaled approximately. million square feet in transactions signed. The largest lease executed was by Amazon Web Services for,77 square feet at 13 Woodland Park Road - One Dulles Tower in Herndon, VA. Three buildings, totaling 7,5 square feet, broke ground ( DC, 1 VA, MD); increasing the metro area s development pipeline to 1,9,1 square feet (3% pre-leased). No buildings were delivered in the second quarter. There were twenty-five sale transactions in the first quarter, totaling $1.7 billion. The largest sale was 1919 N. Lynn Street - Waterview Tower in Arlington, VA trading for $,, ($711 psf). Average asking rental rates increased $.3 to $3.3 per square foot, Full Service. From May 1 - May 17 the DC Metropolitan area had a net increase of,3 jobs (, private sector,,3 government) representing 1.5% growth, while the unemployment rate decreased to 3.%. The DC Metro is ranked 11th nationally in unemployment. DC VA MD Metro Area (YTD) Direct Vacancy (Q 17) 1.5% 15.5% 15.1% 1.% Total Vacancy (Q 17) 11.% 1.3% 15.7% 15.% Total Net Absorption (YTD 17) 77,731 SF 353,15 SF 5,93 SF 7,59 SF (YTD 17).5 M SF. M SF 1. M SF 1.5 M SF 3 11 Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

4 Metropolitan D.C. Market Overview Outlook The Washington D.C. Metropolitan market softened slightly as vacancy increased and the region recorded negative net absorption in the second quarter (YTD absorption remained positive, however). The market experienced some positive trends in the second quarter as well with an uptick in leasing activity, asking rents, and sales. Regional employment experienced 1.5% of growth YOY ending May 17, primarily driven by the private sector, specifically the Professional and Business Services industry. The unemployment rate decreased to 3.%; ranking the DC Metro area 11th in unemployment nationally (among cities of 1 million+ people). Looking ahead, the private sector will continue to be the primary driver for employment in the Washington, DC Metropolitan area; with the Professional & Business Services industry leading the way. Uncertainty among the Federal agencies concerning budgets and staffing, coupled with agency consolidations/ downsizing, should continue to affect GSA leasing throughout 17. While vacancy decreased in Northern Virginia and pre-leasing is strong market-wide, the DC metro area should remain a tenant s market through 17. Aggressive landlords will continue to offer generous concessions and initiate capital improvements to remain competitive. 11 Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

5 Washington, D.C. Market Summary The Washington, DC office market consists of 7 buildings over 5, square feet, totaling approximately 1.1 million square feet of rentable space. As of May 17, the unemployment rate for the District of Columbia increased to.%, while the Washington, DC Metropolitan area decreased to 3.% (ranking 11th nationally). The national unemployment rate decreased to.%. The DC Metropolitan area gained,3 net new jobs from May 1-May 17, representing 1.5% growth. Professional & Business Services lead the private sector with 15, new jobs; while the Government added,3. The largest public sector lease executed this quarter was a renewal by the GSA for the Department of Education for 31,3 square feet at 55 1th Street, SW - Potomac Center South. Washington Gas signed the largest private sector lease with a 7,5-square-foot transaction at 1 Maine Avenue, SW - The Wharf. Direct Vacancy Total Vacancy Net Absorption (SF) Leasing Activity (SF) (SF) U/C Percent Pre-Leased Q 17 1Q 17 Q 1 1.5% 1.% 1.3% 11.% 1.9% 11.% 17,7 17,,5. M.3 M.1 M 5. M. M 3.3 M 53% 9% 39% There were eight sale transactions in DC, totaling $5,1,. The largest sale was Unizo Holdings purchasing 135 G Street, NW and 131 G Street, NW - The Colorado Building for $59,, ($5 psf). (SF), Vacancy Rate $5.3 $51.7 $51.3 The total vacancy rate in the District increased to 11.% at the end of the second quarter, totaling approximately 1. million square feet of vacant space. The Class A total vacancy rate increased to 13.%, while Class B total vacancy decreased to.%. Sales Volume $5 M $ M $371 M Unemployment DC Metro Area 3.% 3.9% 3.% Sublet vacancy remained flat at.% at the end of the second quarter, totaling approximately 1. million square feet Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

6 Washington, D.C. Net Absorption & Leasing The Washington, DC market recorded 17,7 square feet of net absorption in the second quarter; totaling 77,731 square feet absorbed YTD 17. The 1-year average for net absorption in the District is 1. million square feet absorbed per year. Contributing to the positive absorption this quarter included the Federal Bureau of Prisons moving into 115,31 square feet at 91 D Street, SW. The Central Business District (CBD) market posted -73,533 square feet of net absorption in the second quarter; totaling -13,75 square feet absorbed YTD 17. The East End market posted -,3 square feet of net absorption in the second quarter; totaling 7,79 square feet absorbed YTD 17. A total of,15,1 square feet of leases were executed in the second quarter, bringing the YTD 17 total to,71, square feet leased. The 1- year average for leasing activity in DC is 9.7 million square feet annually. Net Absorption Vacancy Rate '7 ' '9 '1 '1 '1 '1 Net Absorption Total Vacancy Rate The largest lease executed this quarter was a renewal by the GSA - Department of Education for 31,3 square feet in the Southwest market; all other leases in the Top Ten ranged between 9, to 3, square feet. '7 ' '9 '1 '1 '1 '1 Fourteen buildings were under construction in Washington, DC at the end of the second quarter, totaling,99,917 square feet (53% pre-leased) Pre-leasing remained strong at 7% in the core markets of the CBD and East End, while the rest of the DC market improved to 39% pre-leased. 9 Two buildings broke ground; 131 Pennsylvania Avenue, NW - One Freedom Plaza (3,5 sf, % pre-leased to Kirkland & Ellis) and 1 M Street, SE (13, sf, 1% pre-leased to the National Association of Broadcasters). 3 '7 ' '9 '1 '1 '1 '1 11 Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

7 Washington, D.C. (cont d) Buildings expected to deliver in 17 include; Maine Avenue, SW (, sf, 5% pre-leased) and 7 Pennsylvania Avenue, SE (3,5 sf, 31% pre-leased). Buildings expected to deliver in 1 include; 99 M St, SE (31, sf, 11% pre-leased), 1 Maine Ave, SW (5, sf, 5% pre-leased), 11 Pennsylvania Ave, NW (,, % pre-leased, th St, NW (75, sf, % pre-leased), 91 th St, NW (1, sf, 7% pre-leased), and 55 New York Ave, NW (75, sf, % preleased), and 15 M St, NE - Constitution Square IV (93, sf, 1% pre-leased), and 1 M St, SE. Massachusetts Avenue, NW (,99 sf, % pre-leased) and 5 Massachusetts Avenue, NW (559,91 sf, % pre-leased) at Capitol Crossing are expected to deliver in 1 as well. Sales Volume Sales Volume ($ Billions) '7 ' '9 '1 '1 '1 '1 Vacant Space Available & Vacancy by Class 1 13.% 1 5 L Enfant Plaza, SW (15, sf, 53% preleased) and 131 Pennsylvania Avenue, NW are expected to deliver in 19. No buildings delivered in the second quarter 17. The 1-year average for new inventory added to the District is 1.7 million square feet per year. Outlook 1 1.%.% 1 1 (%) of Building Class Vacant Washington, DC should continue to be a tenant s market through abundant supply and flat demand. A B C The Class B market is expected to tighten further as more owners transition Class B product to Class A through extensive capital improvements. The GSA is expected to execute more short-term lease extensions (1- year terms). The consolidation and downsizing of the federal real estate footprint remains a priority of the GSA. Aggressive landlords continue to offer generous concessions (free rent and TI s) to be competitive Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

8 Washington, D.C. Washington, D.C. Top Sales 135 G St, NW & 131 G St, NW Submarket East End New Hampshire Ave, NW The Watergate Submarket West End 1155 Connecticut Ave, NW The Demonet Submarket CBD 1th St, NW Submarket CBD Date Sold April 17 Price $59,, ($5 PSF) Buyer Unizo Holdings Company Westbrook Seller Partners / TIER REIT RBA,19 SF Class A Leased 91.% Cap Rate 5.% Date Sold April 17 Price $135,, ($37 PSF) Washington Real Buyer Estate Investment Trust (WRIT) Seller Bradley Holdings RBA 39, SF Class A Leased 9.% Cap Rate.% Date Sold June 17 Price $,5, ($3 PSF) Buyer Alduwaliya US Real Estate, Inc. Seller Textron RBA 9,97 SF Class A Leased 97.3% Cap Rate.9% Date Sold June 17 Price $3,5, ($3 PSF) Buyer Trammell Crow / Meadow Partners Motion Picture Seller Association of America (MPAA) RBA 153, SF Class B Leased % Cap Rate N/A Notes -building portfolio sale Notes % Partial Interest Transfer / Redevelopment 3 1th St, SW Cotton Annex Submarket Southwest 55 Wisconsin Ave, NW Submarket Uptown E St, NW Weschler Galleries Submarket East End 9 S. Capitol St, SW Submarket Southeast Date Sold April 17 Price Buyer Seller RBA $3,1, ($31 PSF) Douglas Development GSA - United States of America 79,35 SF Date Sold June 17 Price Buyer Seller RBA Class $19,, ($3 PSF) David Schaeffer Amalgamated Transit Union 5,5 SF B Date Sold May 17 Price Buyer Seller RBA $15,1, ($7 PSF) Douglas Development Adam Weschler & Son 3,35 SF Date Sold June 17 Price $1,, ($37 PSF) Buyer Harbor Group International Seller CityInterests RBA,7 Class B Class C Leased % Class C Leased 1% Leased % Cap Rate N/A Leased % Cap Rate.% Cap Rate N/A Notes Mixed-use Cap Rate N/A Notes Auction Sale / Redevelopment 11 Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

9 Washington, D.C. Top Ten Leases In the second quarter 17 there were six renewals and four new leases in the Top Ten, with only one lease over 1, square feet. The largest lease executed this quarter was in the public sector with a 31,3-square-foot renewal by the GSA for the Department of Education (DoE) at 55 1th Street, SW. The largest private sector lease was signed by Washington Gas for 7,5 square feet at 1 Maine Avenue, SW - The Wharf (relocating from 11 Constitution Ave, NW). All three of the GSA transactions; DoE, Consumer Finance Protection Bureau (CFPB), and Department of Homeland Security (DHS), were shortterm renewals. The DoE and CFPB both renewed for three years, while the DHS renewed for five years. Hollingsworth was the only law firm in the Top Ten this quarter, executing an early renewal for,53 square feet at 135 Eye Street, NW. A total of,15,1 square feet was leased in the second quarter 17, representing a 1.% decrease from the,55,5 square feet leased in the first quarter. The market has totaled,71, square feet of leasing activity through the first half of 17; equaling % of the yearly 9.7 million square foot 1-year average. 55 1th St, SW Potomac Center South GSA - Department of Education (DoE) 31,3 SF Renewal 135 Eye St, NW Hollingsworth,53 SF Renewal 199 K St, NW 9 K St, NE GSA - Consumer Finance Protection Bureau (CFPB) GSA - Department of Homeland Security (DHS) 9, SF,3 SF Renewal Renewal 1 Maine Ave, SW The Wharf Washington Gas 7,5 SF New 177 Pennsylvania Ave, NW Morgan Stanley,39 SF Renewal / Expansion 1 K St, NW Bank of America 1,7 SF New 115 L St, NW Independent Community Bankers of America (ICBA) 39,31 SF Renewal 555 1th St, NW District Center MacFadden & Associates 57,39 SF New / Expansion 11 Pennsylvania Ave, NW FiscalNote 3, SF New 9 11 Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

10 Market Spotlight CBD '7 ' '9 '1 '1 '1 '1 Total Net Absorption '7 ' '9 '1 '1 Direct Vacancy Rate '1 '1 Total Vacancy Rate Highlights Total vacancy in the CBD market increased to 9.5% at the end of the second quarter, up from.9% at the end of the first quarter. The CBD recorded -73,533 square feet of net absorption in the second quarter, a further decrease from the -5,3 square feet absorbed in the first quarter. s contributing to the negative net absorption include the National Association of County and City Health Officials (NACCHO) vacating 33,9 square feet at 11 17th Street, NW (relocated to 11 Eye St, NW). Leasing activity increased to 7,9 square feet in the second quarter, up from the 7, square feet leased in the previous quarter. s executing leases this quarter include the GSA - Consumer Finance Protection Bureau (CFPB) renewing 9, square feet at 199 K Street, NW, Bank of America signing for 1,7 square feet at 1 K Street, NW, and MacFadden & Associates expanding 57,39 square feet at 555 1th Street, NW Connecticut Avenue, NW - The Demonet sold to Alduwaliya from Textron for $,5, ($3 psf). The building was 97.3% leased at time of sale and traded at a.9% Cap Rate. 1 Year Averages (7-1) Net Absorption Market Stats Inventory 5,37 SF / Year 1,197 SF / Year 3.1 M SF / Year. M SF Direct Vacancy.7% Total Vacancy 9.5% YTD 17 Absorption YTD 17-13,75 SF 1. M SF, SF Percent Pre-Leased % YTD 17 7: $7. 1: $53.79 SF YTD 17: $ Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

11 Market Spotlight East End '7 ' '9 '1 '1 '1 '1 Total Net Absorption '7 ' '9 '1 '1 Direct Vacancy Rate '1 '1 Total Vacancy Rate Highlights Total vacancy in the East End market increased to 13.% at the end of the second quarter, up from 1.5% at the end of the first quarter. 1 Year Averages (7-1) Net Absorption,355 SF / Year 9, SF / Year The East End recorded -,3 square feet of net absorption in the second quarter, down from the 113,7 square feet absorbed in the first quarter. s contributing to the negative net absorption include FTI Consulting vacating 57,99 square feet at 111 K Street, NW Market Stats Inventory 3.5 M SF / Year. M SF Leasing activity decreased to 5,75 square feet in the second quarter, down from the 7,15 square feet leased in the previous quarter. s executing leases this quarter include MacFadden & Associates signing for 57,39 square feet of expansion space at 555 1th Street, NW - District Center and Hollingsworth renewing,53 square feet at 135 Eye Street, NW. 131 Pennsylvania Avenue, NW - One Freedom Plaza broke ground in the second quarter. This 3,55-square-foot building is % pre-leased to Kirkland & Ellis and expected to deliver in the first quarter 19. Direct Vacancy 1.1% Total Vacancy 13.% YTD 17 Absorption 7,79 SF YTD M SF. M SF Percent Pre-Leased 7% YTD 17 SF 135 and 131 G Street, NW - The Colorado Building sold to Unizo Holdings from Westbrook Partners / TIER REIT for $59,, ($5 psf). 7: $9.73 1: $5.3 YTD 17: $ Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

12 Market Spotlight CBD / East End Class A '7 ' '9 '1 '1 '1 '1 Total Net Absorption '7 ' '9 '1 '1 Direct Vacancy Rate '1 '1 Total Vacancy Rate Highlights Total vacancy in the CBD / East End Class A market increased to 1.% at the end of the second quarter, up from at 1.9% at the end of the first quarter. The Class A market recorded -93,719 square feet of net absorption in the second quarter, a significant drop from the 193,5 square feet absorbed in the first quarter. s contributing to the negative absorption include FTI Consulting vacating 57,99 square feet at 111 K Street, NW and the National Association of County and City Health Officials (NACCHO) vacating 33,9 square feet at 11 17th Street, NW. Leasing activity totaled 715,3 square feet in the second quarter, a decrease from the 1,5,3 square feet leased in the previous quarter; totaling 1,7, square feet leased YTD 17. s executing leases this quarter include FiscalNote signing for 3, square feet at 11 Pennsylvania Avenue, NW, Edgeworth Economics expanding,3 square feet at th Street, NW, and Defense Analysis signing for 1,51 square feet at 171 Pennsylvania Avenue, NW. 1 Year Averages (7-1) Net Absorption 31,35 SF / Year 1,19 SF / Year.1 M SF / Year Market Stats Inventory 57.1 M SF Direct Vacancy 1.9% Total Vacancy 1.% YTD 17 Absorption 1,137 SF YTD M SF.3 M SF Percent Pre-Leased 7% YTD 17 SF A total of five Class A buildings ( East End, 1 CBD) were under construction at the end of the second quarter, totaling,5,55 square feet. 7: $ : $5. YTD 17: $ Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

13 Market Spotlight CBD / East End Class B '7 ' '9 '1 '1 '1 '1 Total Net Absorption '7 ' '9 '1 '1 Direct Vacancy Rate '1 '1 Total Vacancy Rate Highlights Class B asking rents increased to $5. psf, FS at the end of the second quarter, an increase of $.3, or 1.9%, since the end of the first quarter. The Class B market continues to out-pace the Class A market in total vacancy; 7.5% (Class B) vs. 1.% (Class A). Class B buildings recorded a total of,391 square feet of net absorption in the second quarter. s contributing to the positive net absorption include Terra Eclipse moving into,5 square feet at 91 F Street, NW. Leasing activity totaled 59,57 square feet in the second quarter, an increase from the 15,995 square feet leased in the previous quarter; totaling 1,5,77 square feet leased YTD 17. s executing leases this quarter include Advanced Discovery signing for, square feet at 11 Vermont Avenue, NW and Vox Media renewing 1,5 square feet at 11 Connecticut Avenue, NW. One Class B building sold in the CBD; an % partial interest transfer of 1th Street, NW traded to Trammell Crow / Meadow Partners from Motion Pictures Association of America (MPAA) for $3,5, ($3 psf). 1 Year Averages (7-1) Net Absorption Market Stats Inventory -,9 SF / Year SF / Year.5 M SF / Year 33.5 M SF Direct Vacancy.9% Total Vacancy 7.5% YTD 17 Absorption YTD ,717 SF 1. M SF SF Percent Pre-Leased % YTD 17 7: $3.17 1: $5.7 SF YTD 17: $ Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

14 Market Spotlight Southwest '7 ' '9 '1 '1 '1 '1 Total Net Absorption '7 ' '9 '1 '1 Direct Vacancy Rate '1 '1 Total Vacancy Rate Highlights Total vacancy in the Southwest market decreased to 1.3% at the end of the second quarter, down from 13.% at the end of the first quarter. The Southwest recorded 3,3 square feet of net absorption in the second quarter, a substantial increase from the -3,77 square feet absorbed in the first quarter. s contributing to the positive absorption include the Federal Bureau of Prisons moving into 115,31 square feet at 91 D Street, SW and the Social Security Administration moving into 5,7 square feet at 5 E Street, SW. Leasing activity increased to 79,77 square feet in the second quarter, up from the 11,99 square feet leased in the previous quarter. Leases executed this quarter include the GSA - U.S. Department of Education renewing 31,3 square feet at 55 1th Street, SW and Washington Gas signing for 7,5 square feet at 1 Maine Avenue, SW - The Wharf. 1 Year Averages (7-1) Net Absorption 159,3 SF / Year 19,99 SF / Year 17,15 SF / Year Market Stats Inventory 11.9 M SF Direct Vacancy 1.1% Total Vacancy 1.3% YTD 17 Absorption 3,579 SF YTD 17 59,3 SF 5, SF Percent Pre-Leased 5% Three buildings are currently under construction in the Southwest; 5 L Enfant Plaza, SW (15, sf, 53% pre-leased), Maine Avenue, SW (, sf, 5% pre-leased, and 1 Maine Avenue, SW (5, sf, 5% pre-leased). YTD 17 7: $. 1: $51.7 SF YTD 17: $ Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

15 Market Spotlight West End / Georgetown '7 ' '9 '1 '1 '1 '1 Total Net Absorption '7 ' '9 '1 '1 Direct Vacancy Rate '1 '1 Total Vacancy Rate Highlights Total vacancy in the West End / Georgetown market increased to.3% at the end of the second quarter, up from 7.9% at the end of the first quarter. The West End / Georgetown recorded -19,1 square feet of net absorption in the second quarter, down from the 3,5 square feet absorbed in the first quarter. Leasing activity decreased to,97 square feet in the second quarter, down from 3,3 square feet leased in the previous quarter. Leases executed this quarter include Garvey Schubert Barer renewing 1,137 square feet at 1 Potomac Street, NW and Paulson & Nace signing for 3,79 square feet at 15 Thomas Jefferson Street, NW. New Hampshire Avenue, NW sold to Washington Real Estate Investment Trust from Bradley Holdings for $135,, ($37 psf). 1 Year Averages (7-1) Total Absorption 3,19 SF / Year 3,9 SF / Year 99,739 SF / Year Market Stats Inventory 7.7 M SF Direct Vacancy 7.% Total Vacancy.3% YTD 17 Absorption 19,73 SF YTD 17 3, SF SF Percent Pre-Leased % YTD 17 SF 7: $5. 1: $51.51 YTD 17: $ Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

16 Market Spotlight Capitol Hill / NoMa '7 ' '9 '1 '1 '1 '1 Total Net Absorption '7 ' '9 '1 '1 Direct Vacancy Rate '1 '1 Total Vacancy Rate Highlights Total vacancy in the Capitol Hill / NoMa market increased to 1.% at the end of the second quarter, up from 1.3% at the end of the first quarter. Capitol Hill / NoMa recorded -3, square feet of net absorption in the second quarter, down from the,35 square feet absorbed in the first quarter. Contributing to the negative net absorption includes the National Committee to Preserve Social Security vacating 31,3 square feet at 1 G Street, NE. Leasing activity decreased to 5,9 square feet in the second quarter, down from the 5,79 square feet leased in the previous quarter. Leases executed this quarter include GSA - Department of Homeland Security (DHS) renewing,3 square feet at 9 K Street, NE, Court Services and Offender Supervision Agency (CSOSA) signing for 3,35 square feet at N. Capitol Street, NW, and the American Gas Association renewing 9,91 square feet at - N. Capitol Street, NW. 1 Year Averages (7-1) Net Absorption 3,39 SF / Year,55 SF / Year 977,3 SF / Year Market Stats Inventory 1. M SF Direct Vacancy 9.9% Total Vacancy 1.% YTD 17 Absorption 9,97 SF YTD 17 5,3 SF 1.7 M SF Percent Pre-Leased 33% YTD 17 SF At the end of the quarter four buildings, totaling 1,9,37 square feet, were under construction in the Capitol Hill / NoMa market. 7: $.7 1: $51.9 YTD 17: $ Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.

17 Market Spotlight Capitol Riverfront '7 ' '9 '1 '1 '1 '1 Total Net Absorption '7 ' '9 '1 '1 Direct Vacancy Rate '1 '1 Total Vacancy Rate Highlights Total vacancy in the Capitol Riverfront market decreased to.9% at the end of the second quarter, down from 15.% at the end of the first quarter. The Capitol Riverfront recorded 9,79 square feet of net absorption in the second quarter, an increase from the,35 square feet absorbed in the first quarter. s contributing to the positive net absorption include WeWork moving into, square feet at M Street, SE. Leasing activity decreased to 59,37 square feet in the second quarter, down from the 71,51 square feet leased in the previous quarter. s executing leases this quarter include PYXERA Global signing for 17,5 square feet at 99 M Street, SE and General Dynamics signing for 13,5 square feet at M Street, SE. Two buildings are currently under construction in the Capitol Riverfront; 99 M Street, SE (31, sf, 11% pre-leased) and 1 M Street, SE (13, sf, 1% pre-leased). 1 Year Averages (7-1) Net Absorption 1,11 SF / Year 155,15 SF / Year,5 SF / Year Market Stats Inventory 3. M SF Direct Vacancy.% Total Vacancy.9% YTD 17 Absorption 13,1 SF YTD 17 13,17 SF 31, SF Percent Pre-Leased % YTD 17 SF 19 Half Street, SW (7, sf) was removed from the office inventory this quarter due to its future conversion into residential. This was the primary cause of vacancy dropping.3%. 7: $.1 1: $.35 YTD 17: $ Constitution Ave., Suite 35 East Washington D.C Wilson Blvd., Suite Arlington, VA 73.5.