The Washington, D.C., office market concluded 2024 with positive absorption—more space occupied than vacated—for the first time since the second quarter of 2023. This trend was driven by strong absorption across both the District and Northern Virginia, totaling approximately 50,000 square feet in the fourth quarter of 2024.
In the District, significant tenant move-ins contributed to this uptick. Notably, the Pharmaceutical Research and Manufacturers of America (PhRMA) leased about 77,000 square feet at Tower 2 at The Wharf, while law firm Cozen O’Connor took nearly 66,000 square feet at 2001 M Street NW, according to CoStar data.
Northern Virginia saw similar momentum, with leasing activity at the newly completed Fuse at Mason Square complex in Arlington. This 345,000-square-foot development, completed by George Mason University as a state-of-the-art research and technology hub, also attracted commercial tenants, including Cybastion, a technology company.
Despite this positive absorption, suburban Maryland experienced negative absorption, primarily due to the departure of large tenants. The most significant move-out came from 2U, an ed-tech firm that vacated over 300,000 square feet at 7900 Harkins Road in Lanham in response to ongoing financial challenges.
Overall, the region’s office market lost approximately 4.5 million square feet in 2024, an increase from the 3.2 million square feet lost in 2023 and 1 million square feet in 2022. While a single quarter of positive absorption is a promising sign, it will take more sustained growth to recover from the current market conditions.
Looking ahead, leasing activity is expected to remain a key indicator of future absorption. In the fourth quarter of 2024, office leasing reached its highest point of the year, outpacing the same period in 2023. This suggests that the positive absorption trend could persist into 2025, contributing to a potential recovery in the D.C. area office market.
However, it may take several years of continued positive absorption to significantly reduce the current 20% availability rate, with over 100 million square feet still available for lease. On a more positive note, supply-side pressures have eased, with only 2 million square feet of office space currently under construction.
Despite these improvements, challenges remain, including a slowdown in office employment, uncertainty around federal government tenant demand, and the ongoing trend of tenants seeking smaller spaces upon renewal.
