The Washington region enjoys one of the highest median incomes in the nation, supporting a robust consumer base. The retail market remains tight, with an availability rate of 4.3%, the lowest since 2008, and annual asking rent growth at 3.6%, surpassing the 10-year average of 2.7%. However, due to a lack of new construction, the market absorbed only 110,000 square feet over the past year, significantly below the 10-year average annual absorption of 1 million square feet.
The Washington, D.C. office market continues to face challenges. As of the fourth quarter of 2024, the region experienced a negative absorption of 6 million square feet. Further declines are anticipated as office-related employment slows, space consolidations continue, and the outlook for federal agency office use remains uncertain. The metro’s vacancy rate has reached a record high of 17.4%, with an overall availability rate of 20.3%, exceeding the national average of 16.4%. This trend reflects slower job growth in the Washington area and office occupiers’ efforts to optimize their space usage.
The multifamily market in Washington, D.C. is among the largest in the country, comprising approximately 580,000 units. It is currently outperforming national averages across several metrics, with stable vacancy rates, increasing rents, and supply in line with demand. Population growth has bolstered apartment demand throughout 2024. Although supply additions have led to slightly higher metro vacancy rates, trailing four-quarter absorption in Q4 2024 exceeded historical averages, and annual rent growth ranks among the strongest in the nation.
In the past year, approximately 15,000 units were absorbed, surpassing the historical norm of about 12,000 units annually over the previous decade. In Q3 2024, absorption totaled around 3,600 units, while 3,900 units were delivered, keeping the vacancy rate stable at 6.8%, consistent with the market’s 10-year average. For comparison, the national vacancy rate stands at 7.9%.
Washington’s industrial market has shown relative resilience as we approach late 2024. The lower emphasis on industrial and manufacturing in the region, combined with high land costs and the influence of the data center industry, has contributed to this stability. While the market has not escaped the broader national slowdown in logistics demand, Northern Virginia’s leading data center cluster has increased demand for specialized spaces. Additionally, the local focus of distributors has limited large-box speculative construction, which has driven a nationwide rise in vacancies. The vacancy rate has increased to 5.7% from a three-year low of 3.8%, primarily due to a slowdown in annual net absorption, which reached 2.8 million square feet in Q4 2024 compared to a 10-year average of 5.5 million square feet.
