Washington DC Commercial Office Space for Rent

Q4 2025

Washington D.C. Commercial Real Estate Market Report

Focus: Q4 2025 Market Trends

Executive Summary

The Washington D.C. commercial real estate (CRE) market is navigating a complex period of "recalibration" in late 2025, heavily influenced by federal sector shifts [1, 2]. The Office market is facing record-high vacancy as government agencies reduce their footprints, though "trophy" assets continue to outperform [1, 4]. Industrial fundamentals remain robust due to data center demand and logistics, despite a national cooling trend [5, 9]. Retail is a bright spot, boasting the lowest vacancy rates since 2008 due to limited new supply [6]. Multifamily demand is absorbing a significant supply wave, keeping fundamentals relatively stable despite flat rent growth [7, 8].

TenantBase Proprietary Data [10] highlights the distribution of active tenant demand over the last 90 days (516 total deals):

  • Retail/Storefront dominated market activity with 62.02% of all searches [10].
  • Warehouse was the second most active sector at 34.11% [10].
  • Office accounted for 4.84% of total search volume [10].

Office Market

Market Overview The D.C. office market is bifurcated, with "trophy" buildings seeing fierce competition while commodity Class B and C assets struggle with the impact of federal downsizing [1, 4].

  • Vacancy & Availability: The overall vacancy rate rose to 22.4% in Q3 2025, a historic high driven by federal lease terminations [4]. However, vacancy for Trophy assets dropped to 10.2%, underscoring the "flight to quality" [4].
  • Net Absorption: The market recorded negative net absorption of 157,000 SF to 553,113 SF in Q3, depending on the metric, marking continued contraction [1, 2].
  • Rental Rates: Full-service asking rents averaged $55.16 per SF, with Class A rates reaching $61.56 per SF [1]. Concessions remain at record highs, averaging $141 per SF in tenant improvement allowances [1].
  • Market Drivers: Federal government activity picked up slightly but skewed toward short-term renewals, while the private sector drove 68% of new leasing activity [1, 4].

TenantBase Activity [10]

  • Demand Share: Office accounted for 4.84% of total search volume [10].
  • Lease Term Preference: Demand is split between short-term flexibility and mid-term stability [10]:
    • Less than one year: 30.77% of deals [10].
    • 3-5 Years: 30.77% of deals [10].
    • 2-3 Years: 23.08% of deals [10].
  • Size Requirements: Tenants are seeking compact footprints. The average lower SF required for a Less than one year term is 500 SF, compared to 1,500 SF for a 3-5 Years term [10].

Industrial & Warehouse Market

Market Overview The D.C. region's industrial market remains healthy, buoyed by the expanding data center sector in Northern Virginia and steady logistics demand [5, 9].

  • Vacancy & Rent: The vacancy rate is reported at 6.6%, with median asking rents holding steady at approximately $15.00 per SF annually [5].
  • Demand & Supply: Net absorption reached 2.0 million SF over the last 12 months, signaling strong tenant appetite despite economic headwinds [5].
  • Construction: The pipeline includes 3.5 million SF under construction, primarily concentrated in Prince George's and Frederick counties [5].
  • Investment: Sales volume totaled $2.2 billion, with assets trading at a median price of $217 per SF [5].

TenantBase Activity [10]

  • Demand Share: Warehouse accounted for 34.11% of total search volume [10].
  • Lease Term Preference: Demand is balanced, with a slight preference for mid-term commitments [10]:
    • 3-5 Years: 28.09% of deals [10].
    • 1-2 Years: 26.97% of deals [10].
    • 2-3 Years: 20.22% of deals [10].
  • Size Requirements: The average lower SF required for a 3-5 Years term is 4,647 SF, while the 5+ Years term average requirement is 5,950 SF [10].

Retail Market

Market Overview Washington D.C.'s retail sector is outperforming other asset classes, supported by affluent demographics and a lack of new construction [6].

  • Vacancy & Availability: Availability is at its lowest level since 2008, holding at 4.6%, with vacancy rates in Northern Virginia as low as 3.4% [6].
  • Net Absorption: The market absorbed approximately 280,000 SF in Q3 2025, driven by necessity-based and service-oriented tenants [6].
  • Rental Rates: Asking rents reached a record $34.00 per SF, reflecting a 2.4% year-over-year increase [6].
  • Construction: New supply is severely constrained, with only 774,000 SF underway across the entire region, most of which is already pre-leased [6].

TenantBase Activity [10]

  • Demand Share: Retail/Storefront activity dominated with 62.02% of all search volume [10].
  • Lease Term Preference: Retail tenants show a decisive preference for long-term stability [10]:
    • 5+ Years: 32.76% of deals [10].
    • 3-5 Years: 29.31% of deals [10].
    • 2-3 Years: 17.24% of deals [10].
  • Top Locations: Tenant interest is highest in these submarkets (deal counts) [10]:
    • Washington: 15 [10].
    • Alexandria: 14 [10].
    • Chantilly: 14 [10].

Multifamily Market

Market Overview The multifamily market is stabilizing as it digests a significant wave of new unit deliveries, with demand remaining firm [7, 8].

  • Vacancy & Occupancy: The vacancy rate is approximately 4.4%, with stabilized occupancy hovering near 95% [5, 7].
  • Rents: Rent growth has been flat to slightly negative (-0.3%) year-over-year, averaging $2,227 per unit, as owners prioritize occupancy over rate increases [7, 8].
  • Construction: There are roughly 12,409 units under construction, but new starts have slowed, which will tighten supply conditions by 2026 [5].
  • Demand: The market absorbed over 100,000 units nationally in Q3, a trend mirrored in D.C. where absorption remains in line with long-term averages [8].

2026 Outlook

Looking ahead to 2026, the Washington D.C. market faces a year of transition and opportunity.

  • Office Transformation: The sector will continue to shrink its footprint, with a focus on converting obsolete Class B/C office space into residential and hospitality uses [1, 5].
  • Investment Recovery: Optimism is returning, with investors expected to target "defensive" assets like grocery-anchored retail and multifamily in high-barrier submarkets [9].
  • Industrial & Data Centers: The region's dominance in data centers will continue to drive industrial demand, with vacancy expected to peak in mid-2026 before tightening again [5, 9].

Sources

  1. Cushman & Wakefield: Washington, DC Office MarketBeat Q3 2025
  2. Lincoln Property Company: Q3 2025 Washington, DC Office Market Report
  3. Newmark: Washington Metro Area Office Market Reports | Q3 2025
  4. CBRE: Washington DC Office Figures Q3 2025
  5. Crexi: Washington DC Commercial Real Estate Market Opportunities 2026
  6. Matthews: Washington DC Retail Market Report Q3 2025
  7. Yardi Matrix: Washington DC Multifamily Market Report – November 2025
  8. Cushman & Wakefield: U.S. Multifamily MarketBeat Q3 2025
  9. MetLife Investment Management: 2026 U.S. Commercial Real Estate Outlook
  10. TenantBase Proprietary Market Data (Washington D.C. - Last 90 Days)

Information in this report is aggregated from various third-party sources and synthesized using artificial intelligence and other research tools. While we believe these sources to be reliable, we cannot guarantee the absolute accuracy or completeness of the data. This report is intended for informational purposes to provide market insight and should be independently verified prior to any use in a real estate transaction or legal commitment.