Washington DC Office Figures Q1 2025

Office vacancy increased 10 basis points to 22.6% in Q1 2025, with federal leasing headwinds counteracting positive momentum from the tail end of 2024. The largest driver of occupancy loss during the first quarter was the termination notice for the US Agency for Global Media, which recently signed a full-building lease at 1875 Pennsylvania Avenue NW. Uncertainty also emerged following the USAID funding freeze, when the agency was shuttered. Many government contractors and grantees are still determining the path forward, and their real estate needs have not yet been resolved.

Tenants leased 1.5 million sq. ft during the quarter, on par with historic Q1 averages. Law firms continue to drive leasing activity, accounting for 44% of leasing volume during the quarter. Notable deals included McDermott Will & Emery’s 151,300 sq. ft. prelease to kick off new development at 725 12th Street NW and Freshfields’ 117,000 sq. ft. relocation to Midtown Center, where the firm will more than double its current footprint.

Modern and amenitized buildings remain a bright spot within the DC office market. Trophy vacancy dropped to 12.2% in Q1, while broader vacancy for buildings with a post-2010 vintage sits at just 14.1%. Tenants continue to lease an outsized share of Trophy and A+ space, shrinking the supply of quality office stock and putting further pressure on rents in the upper segment of the market. Trophy and A+ achieved rents grew 9.1% and 8.5% year-over-year, respectively, and concessions are declining in both classes.