Quarterly Market Report

Washington, D.C. Quarterly Market Report

2nd Quarter 2020

lpcwashingtondc.com Washington, D.C. Leasing & Table of Contents Market Research

Metropolitan D.C. Market Overview...... 3 Adam Biberaj Senior Vice President Washington, D.C. Quarterly Overview...... 5 Managing Director [email protected] | 202.513.6736 Washington D.C. Top Sales...... 8 Washington D.C. Top Ten Leases...... 9 Merrill Turnbull Senior Vice President Managing Director [email protected] | 202.513.6713 Market Spotlight, 2Q 2020: CBD...... 10 Jae Lee Senior Vice President East End...... 11 [email protected] | 202.513.6718 CBD / East End | Class A...... 12 John Olson CBD / East End | Class B ...... 13 Senior Vice President [email protected] | 202.513.6730 Southwest ...... 14 Terry Amling West End / Georgetown...... 15 Senior Vice President Capitol Hill / NoMa ...... 16 [email protected] | 202.513.6708

Capitol Riverfront ...... 17 Beth Wilzbach Assistant Vice President

[email protected] | 202.513.6733

William Ruppe Tysons Corner ...... 13 Assistant Vice President [email protected] | 202.513.6722

Tim Weitzel Associate [email protected] | 202.513.6716

Joe Mehok Vice President of Research [email protected] | 202.513.6735

2 Metropolitan D.C. Market Overview 2nd Quarter 2020

Overall Market Summary

The Washington, DC Metropolitan commercial real estate market is comprised of approximately 429.6 million square feet of rentable office space located in the District of Columbia, Northern Virginia, and Suburban Maryland. this quarter; while five buildings, totaling 928,957 square feet, delivered. The largest addition was The total vacancy rate ticked up to 14.0% at the end 1750 Presidents Street - 17Fifty delivering 276,000 of the second quarter, while the market recorded square feet (100% leased to LEIDOS) to the Reston 364,843 square feet of net absorption. Northern submarket in VA. Virginia and Suburban Maryland both posted positive net absorption for the quarter with a There were six sale transactions in the second combined 396,089 square feet absorbed. quarter, totaling $328.75 million. The largest sale was 1530 Wilson Boulevard trading for $71,400,000 ($427 Leasing activity for the quarter totaled 3,447,954 psf) in the RB Corridor of VA. square feet. The largest lease executed was a 396,740-square-foot relet by Microsoft at 11955 Average asking rental rates increased $0.34 to $39.50 Freedom Drive - Two Freedom Square @ RTC, in per square foot, Full Service. Northern Virginia. From May 2019-May 2020 the DC Metropolitan At the end of the quarter, there was 6,876,206 Statistical Area (MSA) lost 67,200 jobs, representing square feet under construction, with 69% of the a contraction of 8.5%% YOY, while the unemployment space pre-leased. No buildings broke ground rate increased to 9.0%.

Metro DC VA MD Area (YTD)

Direct Vacancy 12.0% 13.8% 13.1% 13.0% (2Q 2020)

Total Vacancy 13.2% 14.5% 14.0% 14.0% (2Q 2020)

Total Net Absorption -474,256 -792 -352,443 -121,021 (YTD 2020) SF

Leasing Activity 3,452,820 3,396,769 1,441,094 8.3 M SF (YTD 2020)

Market Outlook / COVID-19

Market fundamentals for the Metropolitan The impact of the COVID-19 pandemic on Washington, DC office market continued to soften our daily lives, and commercial real estate, is in the second quarter 2020 due to the COVID-19 extremely fluid. The DC region is currently in pandemic. Even though close to 365,000 square Phase 2 of re-opening, including the re-opening feet was absorbed in the second quarter, total of non-essential retail and the voluntary return vacancy ticked up to 14.0% for the metro area for office workers. While office buildings have re- (absorption is still negative for the region YTD opened, the vast majority of DC area employees, 2020). Despite the pandemic, leasing activity was including the government, continue to telework only down 29% quarter-over-quarter, as velocity (less than 20% have returned to the office). was driven by an increase of sizable tenant Upticks in vacancy and decreased net absorption renewals across the metro. Investment sales, as are expected for the next two quarters, as tenants expected, were few, as most negotiations have and the CRE industry continue to whether the stalled. A very limited amount of new buildings, if pandemic. The DC area has seemed to ‘flatten any, are expected to come to market near term. the curve” while most of the South and West of The region lost 67,200 jobs YOY ending May 2020 the country have seen a recent spike in cases and with the Leisure & Hospitality sector suffering the have re-imposed some business closures. While majority of these losses (49,600 jobs). The current industry experts remain hopeful that the economy unemployment rate increased to 9.0% in the DC will improve by late 2020 or early 2021, locally, Metro, but it is still lower than the 11.1% nationalSublease Added 2Q the2020 next (SF) few weeks will decide if the DC area is average. Incredibly, the Washington, DCSan MSAFrancisco ready1,400,000 to move into Phase 3, plateau on Phase 2, ranks 4th nationally in unemployment (in MSAs or possibly regress due to an influx in COVID-19 New York 1,300,000 over 1 million in population). cases. Boston 1,200,000

Los Angeles 905,000 The COVID-19 pandemic Atlantahas caused a substantial increase800,000 of sublease space available on the market nationally. ChicagoThe DC Metro area added 334,000425,000 square feet of available sublease space to the marketDC Metro in the second quarter 2020.334,000 However, DC has added the least amount of available sublease space compared to other major markets (see chart below).

Sublease Space Added 2Q 2020 (SF)

DC Metro 334,000

Chicago 425,000

Atlanta 800,000

Los Angeles 905,000

Boston 1,200,000

New York 1,300,000

San Francisco 1,400,000

0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000

Market Summary 2Q 2020 1Q 2020 2Q 2019 The Washington, DC office market currently consists of 801 buildings, over 25,000 square feet, totaling approximately 152.1 million square feet of Direct 12.0% 12.0% 10.6% rentable space. Vacancy

Due to the COVID-19 pandemic, unemployment has spiked across the region. As of May 2020, the Total 13.2% 13.0% 11.5% unemployment rate for the District of Columbia Vacancy increased to 8.9%, while the Washington, DC Metropolitan area increased to 9.0%. The national unemployment rate increased to 11.1%. Net -31,246 30,454 1.0 M The DC Metropolitan Statistical Area (MSA) Absorption (SF) lost 67,200 jobs from May 2019-May 2020, representing a contraction of 8.5% YOY. Leisure & Leasing Hospitality contracted the most with 49,600 jobs 1.5 M 1.9 M 3.7 M lost; while the Government gained 2,300. Activity (SF)

The largest public sector lease executed this quarter was a renewal by the GSA - Department of Under 2.1 M 2.2 M 3.9 M Education renewing 290,000 square feet at 550 Construction (SF) 12th Street, SW - Potomac Center South.

Wiley Rein signed the largest private sector lease U/C Percent 56% 60% 49% with a 166,250-square-foot transaction at recently Pre-Leased delivered 2050 M Street, NW in the CBD.

There were three sale transactions in DC, totaling $153,000,000 in sales volume. The largest sale was Deliveries (SF) 155,000 1.1 M 1.3 M 3300 Whitehaven Street, NW and 2001 Wisconsin Avenue, NW trading to Grosvenor Americas from Equity Commonwealth for $85,000,000. Asking Rental Rates $53.61 $53.79 $53.90 Vacancy Rate (PSF, Full Service)

The total vacancy rate in the District increased to $153.0 M $970.5 M $370.5 M 13.2% at the end of the second quarter, totaling Sales Volume approximately 20.1 million square feet of vacant space. Unemployment 9.0% 3.1% 3.1% Class A total vacancy for DC increased to 14.1% DC Metro Area (approx. 13.0 million sf), while Class B total vacancy increased to 12.3% (approx. 6.7 million sf).

Sublet vacancy increased to 1.1% at the end of the second quarter, totaling approximately 1.7 million square feet of vacant space. However, 2.9 million square feet of sublease is being marketed as available, an increase of 200,000 square feet from the first quarter.

Net Absorption & Deliveries | Net Absorption | Vacancy Rate

Leasing 6 14

5 12 The Washington, DC market recorded -31,246 4 10 square feet of net absorption in the second (%) Rate Vacancy

quarter, down from the 30,454 square feet 3 8 absorbed in the first quarter. A total of -792 square

feet has been absorbed YTD 2020. The 10-year SF (Millions) 2 6 average for net absorption in the District is 1.1 1 4 million square feet absorbed per year. 0 2 Contributing to the negative net absorption -1 0 included the Peace Corps vacating 175,675 square '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20

feet at 1111 20th Street, NW. Deliveries Net Absorption Total Vacancy Rate

The Central Business District (CBD) market posted -234,349 square feet of net absorption in the second quarter; a total of -264,265 square feet has Leasing Activity been absorbed YTD 2020. 14

The East End market posted -184,895 square feet 12 of net absorption in the second quarter; a total of -247,742 square feet has been absorbed YTD 2020. 10

A total of 1,513,197 square feet of leases were 8

executed in the second quarter. The Top Ten leases 6 of the quarter ranged in size from 290,000 to SF (Millions) 30,000 square feet. A total 3,452,820 square feet 4 of leases have been executed YTD 2020. The 10- year average for leasing activity in DC is 10.3 million 2 square feet annually. 0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Construction

Nine buildings remained under construction in Deliveries | Under Construction Washington, DC at the end of the second quarter, 6 totaling 2,108,754 square feet (56% pre-leased). 5 The bulk of the new construction, 1,462,185 square feet, is being built in NoMa, Capitol Riverfront, and 4 at The Wharf. The remaining 646,569 square feet is being developed in the core submarkets of CBD 3 and East End.

SF (Millions) 2 Only one building completed construction; 1050 1 17th Street, NW delivered 155,000 square feet, 0% leased in the CBD. 0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 No new buildings are expected to break ground for Deliveries Under Construction the remainder of 2020.

Construction (cont’d) Sales Volume

Only one building is expected to deliver during 6 the remainder of 2020; 301 N St, NE (38,191 sf,

69% pre-leased to Hickok Cole) is scheduled for 5 completion in the fourth quarter.

4 1275 New Jersey Ave, SE (330,000 sf, 88% pre-

leased), 250 M St, SE (227,950 sf, 97% pre-leased), 3 350 Morse St, NE (226,841 sf, 0% pre-leased), and 699 14th St, NW (164,569 sf, 0% pre-leased) are all 2 expected to deliver in 2021. ($ Billions) Volume Sales 1 The Wharf Phase II includes two larger buildings; 670 Maine Avenue, SW (255,750 sf) and 690 Maine 0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Avenue, SW (293,953 sf). These buildings are a combined 58% pre-leased to Williams & Connolly. A third building, 610 Water St, SW, is 89,500 square feet. All three buildings are expected to be Vacant Space Available & Vacancy by Class completed by the third quarter 2022. 16 16 2100 Pennsylvania Ave, NW (482,000 sf, 68% pre- 14.1% 14 14 12.3% leased to WilmerHale) is scheduled for completion Class VacantBuilding of (%) in late 2022. 12 12

10 10 Four buildings, totaling 1,220,903 square feet, have 8 8 delivered so far in 2020. The 10-year average for 6.5%

SF Vacant (Millions)Vacant SF new inventory added to the District is 1.5 million 6 6 square feet per year. 4 4 Outlook 2 2 0 0 A B C The COVID-19 virus has greatly slowed the commercial real estate industry, but business has not totally ceased. Office tours, initially being done virtually, are now being conducted in person once again with social distancing and the wearing of masks required. In the second quarter, DC experienced only a 22% decrease in leasing activity The District is currently in Phase 2 of re-opening, from the previous quarter, while a few investment including the re-opening of non-essential retail and sales closed (having been negotiated prior to the the voluntary return to work for office workers. While pandemic). Most of the current sales on the market office buildings have re-opened, the vast majority have stalled and very few, if any, new buildings of DC area employees, including the government, are expected to come to market. An increase in continue to telework (less than 20% have returned sublease space is expected to hit the market in to the office). The DC area has seemed to ‘flatten the third quarter (200,000 sf of sublease was the curve” while most of the South and West of the added in the second quarter). Upticks in vacancy country have seen a recent spike in cases and have and negative absorption are expected for the re-imposed some business closures. The next few remainder of 2020, as well as, decreased leasing weeks will determine if the DC area is ready to move activity, all due to the economic uncertainty into Phase 3, plateau on Phase 2, or possibly regress brought on by the pandemic. due to an influx in COVID-19 cases.

Washington, D.C. Top Sales

3300 Whitehaven St, NW 2001 Wisconsin Ave, NW 1307 New York Ave, NW 1509 16th St, NW Harris Building Green Building The Herald Submarket Uptown Submarket Georgetown Submarket Georgetown Submarket East End Date Sold April 2020 Date Sold May 2020 Date Sold May 2020 Date Sold April 2020 $26,500,000 $45,553,072 $39,446,928 $41,500,000 Price Price Price Price ($828 PSF) ($353 PSF) ($353 PSF) ($359 PSF) Vital Voices Grosvenor Grosvenor Buyer Buyer Buyer Marx Realty Buyer Global Americas Americas JV - APLU, CASE, Partnership Equity Equity Seller Seller Seller AASCU, AACTE MakeOffices / Commonwealth Commonwealth Seller RBA 287,053 SF MRP Realty RBA 128,875 SF RBA 111,600 SF RBA 32,000 SF Class B Class B Class B Class B Leased 96% Leased 100% Leased 100% Leased 0% Cap Rate n/a Cap Rate 7.50% Cap Rate 8.65% The sellers will Cap Rate n/a 2-bldg portfolio 2-bldg portfolio vacate the entire Owner User Notes Notes sale, $85.0 M in Notes sale, $85.0 M in building by the end Sale, including total total of 2020 Notes 6,270 sf parking lot approved for redevelopment

2600 Virginia Avenue, NW 1275 1st Street, NE 950 L’Enfant Plaza, SW 899-999 N. Capitol Street, NE The Watergate One Constitution Square Union Square Submarket Southwest Submarket West End Submarket NoMa Submarket NoMa Date Sold September 2019 Date Sold September 2019 Date Sold September 2019 Date Sold July 2019 $104,598,000 $101,500,000 $141,771,984 Price $170,159,906 Price Price ($331 PSF) Price ($471 PSF) ($419 PSF) ($272 PSF) Buyer Boyd Watterson The Seligman Network Realty Buyer Boyd Watterson Normandy Real Buyer Buyer Group / Friedman Seller Partners Walton Street Estate Partners Capital Seller CIM Commercial Capital Seller Rockwood RBA 315,723 SF Trust Corporation Seller RBA 338,645 SF Capital Class B RBA 625,506 SF Class A RBA 215,520 SF Leased 77.7% Class A Leased 100% Class A Cap Rate 6.88% Leased 89.0% Leased 91% Cap Rate 5.36% Cap Rate 6.02% 2-bldg portfolio sale, 39,696 Notes development parcel

Top Ten Leases

In the second quarter 2020 there were three new K Street, NW. leases and seven renewals the Top Ten, including three leases over 100,000 square feet. Two consulting firms made the Top Ten this quarter as well; Berkeley Research Group renewed 68,126 The largest lease executed in the public sector this square feet at 1800 M Street, NW, while RSM US quarter was a 290,000-square-foot renewal by LLP signed for 32,167 square feet at 1250 H Street, the GSA for the Department of Education at 550 NW. 12th Street, SW. The DoE also downsized 25,000 square feet. Wiley Rein had the largest private sec- The Washington, DC market totaled 1,513,197 tor lease signing for 166,250 square feet at 2050 square feet of leasing activity in the second M Street, NW. Wiley will be relocating from 1776 K quarter, representing a 22% decrease from the Street, NW and reducing its footprint by 50%. 1,939,623 square feet leased in the first quarter.

The two law firms represented in the Top Ten were Leasing activity is expected to remain relatively Wiley Rein, signing for 166,250 square feet of new weak near term as the COVID-19 pandemic con- space at recently delivered 2050 M Street, NW and tinues to plague the CRE industry with economic Baker Donelson renewing 39,000 square feet 901 uncertainty.

550 12th Street, SW 1500 Eckington Place, NE Potomac Center South Tenant Century Link GSA - Department of Tenant Education Size 54,608 SF Size 290,000 SF Type Renewal Renewal / Type Contraction

2050 M Street, NW 600 Maryland Avenue, SW Capital Gallery East Tenant Wiley Rein American Farm Tenant Size 166,250 SF Bureau Federation Size 53,176 SF Type New / Contraction Type Renewal

1025 Thomas Jefferson Street, NW 901 K Street, NW Palantir Technologies, Tenant Tenant Baker Donelson Inc. Size 39,000 SF Size 104,777 SF Type Renewal Type Renewal

1201 Pennsylvania Avenue, NW 1250 H Street, NW Herald Square National Endowment Tenant for Democracy (NED) Tenant RSM US LLP Size 82,339 SF Size 32,167 SF

Type New Type New / Expansion

1800 M Street, NW 1130 Connecticut Avenue, NW Berkeley Research Tenant Tenant Solidarity Center Group Size 30,000 SF Size 68,216 SF Type Renewal Type Renewal

CBD 2nd Quarter 2020

1.25 14

1.00 12 0.75 10 0.50 8 0.25

0.00 Rate (%) Vacancy 6 SF (Millions)

-0.25 4 -0.50 2 -0.75 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Under Total Net Deliveries Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2010 - 2019) Net Absorption 115,654 SF / Year Total vacancy in the CBD market increased to 13.3% at the end of the second quarter, up from 12.5% at Deliveries 240,529 SF / Year the end of the first quarter.

The CBD recorded -234,349 square feet of net Leasing Activity 3,079,082 SF / Year absorption in the second quarter, a further drop from the -29,916 square feet absorbed in the first Market Stats quarter. Tenants contributing to the negative net absorption included the Peace Corps vacating Inventory 45.4 M SF 175,675 square feet at 1111 20th Street, NW.

Direct Vacancy 12.1% Leasing activity decreased to 463,962 square feet in the second quarter, down from the 746,841 13.3% square feet leased in the previous quarter. Tenants Total Vacancy executing leases this quarter included Wiley Rein signing for 166,250 square feet at 2050 M Street, YTD 2020 Absorption -264,265 SF NW, Berkley Research Group renewing 68,216 square feet at 1800 M Street, NW, and Stinson LLP YTD 2020 Leasing Activity 1,210,803 SF signing an early renewal for 25,042 square feet at 1775 Pennsylvania Avenue, NW. Under Construction 482,000 SF

1050 17th Street, NW (155,000 sf, 0% leased) Percent Pre-Leased 68% delivered this quarter, while 2100 Pennsylvania Avenue, NW (482,000 sf, 68% pre-leased) YTD 2020 Deliveries 681,000 SF remained the sole building under construction.

Asking Rental Rates 2010: 2019: YTD2020: (PSF, Full Service) $48.84 $54.44 $55.09

East End 2nd Quarter 2020

2.5 16

14 2.0 12 1.5 10 1.0 8 Vacancy Rate (%) Vacancy

SF (Millions) 0.5 6

0.0 4 2 -0.5 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Under Total Net Deliveries Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2010 - 2019) Total vacancy in the East End market decreased to Net Absorption 47,178 SF / Year 14.8% at the end of the second quarter, down from 15.7% at the end of the first quarter. Deliveries 470,165 SF / Year

The East End recorded -184,895 square feet of Leasing Activity 3,830,452 SF / Year net absorption in the second quarter, a further drop from the -62,847 square feet absorbed in Market Stats the first quarter. Contributing to the negative net absorption was CBRE vacating 62,387 square feet Inventory 52.3 M SF at 750 9th Street, NW (relocated to 1900 N St, NW). Direct Vacancy 13.4% Leasing activity decreased to 324,963 square feet 14.8% in the second quarter, down from the 642,133 Total Vacancy square feet leased in the previous quarter. Tenants executing leases this quarter included National YTD 2020 Absorption -247,742 SF Endowment for Democracy signing for 82,329 square feet at 1201 Pennsylvania Ave, NW, Baker YTD 2020 Leasing Activity 967,096 SF Donelson renewing 39,000 square feet at 901 K Street, NW, and RSM US LLP signing for 32,167 Under Construction 164,569 SF square feet of expansion space at 1250 H Street, NW. Percent Pre-Leased 0%

1307 New York Avenue, NW sold to Marx Realty for YTD 2020 Deliveries 0 SF $41,500,000 ($359 psf).

Asking Rental Rates 2010: 2018: YTD 2020: 699 14th Street, NW (164,569 sf, 0% pre-leased) (PSF, Full Service) $53.16 $54.48 $55.63 remained the sole building under construction in the East End.

CBD / East End Class A 2nd Quarter 2020

3.0 16

2.5 14

2.0 12

10 1.5 8 1.0 Vacancy Rate (%) Vacancy SF (Millions) 6 0.5 4 0.0 2 -0.5 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Under Total Net Deliveries Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2010 - 2019) Net Absorption 471,931 SF / Year Total vacancy in the CBD / East End Class A market increased to 15.1% at the end of the second Deliveries 710,694 SF / Year quarter, up from 15.0% at the end of the first quarter. Leasing Activity 4,067,757 SF / Year An additional 131,053 square feet of Class A sublease space was added to the CBD / East End; Market Stats a total of 1,435,182 square feet of sublease is now available on the Class A market. Inventory 56.8 M SF The Class A market recorded -274,599 square feet Direct Vacancy 13.4% of net absorption in the second quarter. Tenants contributing to the negative net absorption 15.1% included CBRE vacating 62,387 square feet Total Vacancy at 750 9th Street, NW. YTD 2020 Absorption -229,632 SF Leasing activity totaled 621,005 square feet in the second quarter. Tenants executing leases YTD 2020 Leasing Activity 1,552,559 SF included Omnicom Group renewing 22,905 square feet at 1615 L Street, NW, The Wilderness Society Under Construction 646,569 SF signing for 22,916 square feet at 1801 Pennsylvania Avenue, NW, and Global Integrity signing for 19,987 Percent Pre-Leased 40% square feet at 1100 13th Street, NW. YTD 2020 Deliveries 526,000 SF 1050 17th Street, NW completed construction this quarter. The 155,000-square-foot building Asking Rental Rates 2010: 2019: YTD 2020: delivered 0% leased. Two buildings remained (PSF, Full Service) $55.55 $58.02 $58.55 under construction; 699 14th Street, NW (164,569 sf, 0% pre-leased), and 2100 Pennsylvania Avenue, NW (482,000 sf, 68% pre-leased).

CBD / East End Class B 2nd Quarter 2020

2.0 14

1.5 12 1.0 10 0.5 8 0.0

-0.5 Rate (%) Vacancy 6 SF (Millions)

-1.0 4

-1.5 2 -2.0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Under Total Net Deliveries Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2010 - 2019) Net Absorption -310,428 SF / Year The vacancy rate in the CBD / East End Class B Market remained flat at 13.6% at the end of the Deliveries 0 SF / Year second quarter.

An additional 92,733 square feet of Class B Leasing Activity 2,825,156 SF / Year sublease space was added to the CBD / East End; a total of 717,951 square feet of sublease is now Market Stats available on the Class B market.

Inventory 39.0 M SF Class B buildings recorded a total of -144,469 square feet of net absorption in the second quarter. Tenants contributing to the negative net Direct Vacancy 12.8% absorption included the Peace Corps vacating 175,675 square feet at 1111 20th Street, NW. Total Vacancy 13.6%

Leasing activity totaled 151,398 square feet in YTD 2020 Absorption -112,596 SF the second quarter. Tenants executing leases included International Executive Service Corps YTD 2020 Leasing Activity 592,445 SF renewing 10,931 square feet at 1900 M Street, NW, NASDAQ, Inc. signing for 8,411 square feet at Under Construction 0 SF 1100 New York Avenue, NW, and Jobs With Justice Education Fund signing for 5,233 square feet at Percent Pre-Leased 0% 1150 Connecticut Avenue, NW. YTD 2020 Deliveries 0 SF One Class B asset sold this quarter; 1307 New York Avenue, NW traded to Marx Realty for Asking Rental Rates 2010: 2019: YTD 2020: $41,500,000 ($359 psf). (PSF, Full Service) $45.19 $49.92 $51.22

Southwest 2nd Quarter 2020

1.50 24 1.25 21 1.00 18 0.75 0.50 15 0.25 12 0.00 SF (Millions) -0.25 Rate (%) Vacancy 9 -0.50 6 -0.75 3 -1.00 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Deliveries Under Total Net Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2010 - 2019) Net Absorption 286,068 SF / Year Total vacancy in the Southwest market decreased to 10.1% at the end of the second quarter, down Deliveries 169,267 SF / Year from 10.3% at the end of the first quarter.

The Southwest recorded -102,453 square feet Leasing Activity 989,948 SF / Year of net absorption in the second quarter, down from the -42,997 square feet absorbed in the first Market Stats quarter. The primary contributor to the negative net absorption was the Federal Communications Inventory 12.4 M SF Commission (FCC) vacating 602,350 square feet at 445 12th Street, SW (relocated to 45 L St, NE in Direct Vacancy 9.9% NoMa).

10.1% Leasing activity increased to 398,250 square Total Vacancy feet in the second quarter, up from the 53,434 square feet leased in the previous quarter. Leases YTD 2020 Absorption -145,450 SF executed this quarter included GSA - Department of Education renewing 290,000 square feet YTD 2020 Leasing Activity 451,684 SF at 550 12th Street, SW, American Farm Bureau Federation renewing 53,176 square feet at 600 Under Construction 639,203 SF Maryland Avenue, SW, and Bread for the World renewing 14,755 square feet at 425 3rd Street, SW. Percent Pre-Leased 50%

The Wharf Phase II includes two larger buildings; YTD 2020 Deliveries 0 SF 670 Maine Avenue, SW (255,750 sf) and 690 Maine Avenue, SW (293,953 sf). These buildings Asking Rental Rates 2010: 2019: YTD 2020: are a combined 58% pre-leased to Williams & (PSF, Full Service) $52.13 $46.97 $46.86 Connolly. A third building, 610 Water Street, SW, totals 89,500 square feet. All three buildings are expected to be completed by the third quarter 2022.

West End / Georgetown 2nd Quarter 2020

0.50 14

12 0.25 10

8 0.00

6 SF (Millions) Vacancy Rate (%) Vacancy

-0.25 4

2 -0.50 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Under Total Net Deliveries Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2010 - 2019) Total Absorption 44,842 SF / Year Total vacancy in the West End / Georgetown market decreased to 10.2% at the end of the Deliveries 45,883 SF / Year second quarter, down from 10.8% at the end of the first quarter. Leasing Activity 549,037 SF / Year The West End / Georgetown recorded 11,810 square feet of net absorption in the second Market Stats quarter, up from the -33,411 square feet absorbed in the first quarter. Contributing to Inventory 7.9 M SF the positive net absorption was Jackson & Campbell moving into 23,445 square feet at Direct Vacancy 9.0% 2300 N Street, NW.

10.2% Leasing activity totaled 154,483 square feet Total Vacancy in the second quarter, up from the 30,484 square feet leased in the previous quarter. YTD 2020 Absorption -21,601 SF Leases executed this quarter included Palantir Technologies renewing 104,777 square YTD 2020 Leasing Activity 184,967 SF feet at 1025 Thomas Jefferson Street, NW, Industry Dive subleasing 26,000 square feet Under Construction 0 SF at 1255 23rd Street, NW, and Shalom Baranes Associates renewing 23,706 square feet at 1010 Percent Pre-Leased 0% Wisconsin Avenue, NW. YTD 2020 Deliveries 0 SF

Asking Rental Rates 2010: 2019: YTD 2020: (PSF, Full Service) $42.17 $47.69 $48.77

Capitol Hill / NoMa 2nd Quarter 2020

2.00 18

1.75 16 1.50 14 1.25 12 1.00 10 0.75 0.50 8 SF (Millions)

0.25 Rate (%) Vacancy 6

0.00 4 -0.25 2 -0.50 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Under Total Net Deliveries Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (20010 - 2019) Net Absorption 469,097 SF / Year Total vacancy in the Capitol Hill / NoMa market decreased to 9.3% at the end of the second Deliveries 469,536 SF / Year quarter, down from 9.9% at the end of the first quarter. Leasing Activity 1,142,291 SF / Year Capitol Hill / NoMa recorded 529,164 square feet of net absorption in the second quarter, Market Stats up from the 94,370 square feet absorbed in the first quarter. Contributing to the positive net Inventory 18.7 M SF absorption included the Federal Communications Commission (FCC) moving into 473,000 square Direct Vacancy 9.0% feet at 45 L Street, NE (relocated from 445 12th St, SW). Total Vacancy 9.3% Leasing activity decreased to 142,226 square feet in the second quarter, down from the 356,173 YTD 2020 Absorption 623,534 SF square feet leased in the previous quarter. Leases executed this quarter included Hickok YTD 2020 Leasing Activity 498,399 SF Cole signing a pre-lease for 24,520 square feet at 301 N Street, NE (relocating from Georgetown), Under Construction 265,032 SF Century Link renewing 54,608 square feet at 1500 Eckington Place, NE, and Year Up leasing 16,795 Percent Pre-Leased 10% square feet at 609 H Street, NE. YTD 2020 Deliveries 539,903 SF Two buildings are currently under construction. 301 N Street, NE (38,191 sf, 69% pre-leased to Asking Rental Rates 2010: 2019: YTD 2020: Hickok Cole) is scheduled to deliver in December (PSF, Full Service) $51.18 $52.55 $52.53 2020 and 350 Morse Street, NE - Signal House (226,841 sf, 0% pre-leased) is expected to deliver in the second quarter 2021.

Capitol Riverfront 2nd Quarter 2020

0.75 20 18 16 0.50 14 12 0.25 10

SF (Millions) 8 Vacancy Rate (%) Vacancy 0.00 6 4

-0.25 2 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 0 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 Deliveries Under Total Net Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2010 - 2019) Net Absorption 98,196 SF / Year Total vacancy in the Capitol Riverfront market decreased to 7.0% at the end of the second Deliveries 38,278 SF / Year quarter, down from 7.8% at the end of the first quarter. Leasing Activity 264,030 SF / Year The Capitol Riverfront recorded 32,475 square feet of net absorption in the second quarter, Market Stats down from the 88,641 square feet absorbed in the first quarter. Contributing to the positive net Inventory 4.3 M SF absorption includes CommonGrounds taking occupancy of 44,182 square feet at 99 M Street, Direct Vacancy 6.3% SE.

7.0% Leasing activity totaled 13,141 square feet in the Total Vacancy second quarter, down from the 87,148 square feet leased in the previous quarter. Tenants executing YTD 2020 Absorption 121,116 SF leases this quarter included R&P Technologies signing for 7,091 square feet at 1201 M Street, SE YTD 2020 Leasing Activity 103,320 SF and Engineer Services Network signing for 5,802 square feet at 100 M Street, SE. Under Construction 557,950 SF

Two buildings remained under construction at Percent Pre-Leased 92% the end of the quarter; 1275 New Jersey Avenue, SE - The Yards (330,000 sf, 88% pre-leased to YTD 2020 Deliveries 0 SF Chemonics) and 250 M Street, SE (227,950 sf, 97% pre-leased to DC DOT). Asking Rental Rates 2010: 2019: YTD2020: (PSF, Full Service) $48.33 $54.93 $55.05