Quarterly Market Report

Washington, D.C. Quarterly Market Report

1st Quarter 2021

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 Spotlights, 1Q 2021: 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 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 1st Quarter 2021

Overall Market Summary

The Washington, DC Metropolitan commercial real estate market is comprised of approximately 431.3 million square feet of rentable office space located in the District of Columbia, Northern Virginia, and Suburban Maryland. Boulevard (97,000 sf) and 9179 Central Avenue (100,000 sf). Five buildings, totaling 1,284,703 square The total vacancy rate increased to 15.3% at the feet, delivered. The largest addition was 1 Capital end of the first quarter, while the market recorded Gateway Drive delivering 574,767 square feet (100% -2,732,185 square feet of net absorption. However, leased and occupied by DHS) in Camp Springs, MD. only an additional 41,732 square feet of available sublease space was added to the market in the first There were seven sale transactions in the first quarter. quarter, totaling $274.12 million. One of the larger sales was 2001 N. Beauregard Street trading for Leasing activity for the quarter totaled 3,163,468 $71,690,000 ($299 psf) in the I-395 Corridor of VA. square feet. The largest lease executed was a 205,860-square-foot renewal by the DC Department Average asking rental rates increased $0.27 to $39.76 of Health at 899 N. Capitol Street, NE in NoMa. per square foot, Full Service.

At the end of the quarter, there was 7,984,788 From Feb. 2020-Feb. 2021 the DC Metropolitan square feet under construction, with 78% of the Statistical Area (MSA) lost 227,200 jobs, representing space pre-leased. Only two buildings broke ground a contraction of 6.8% YOY. However, since May, the this quarter, both in MD; 201 National Harbor DC Metro has added 145,700 new jobs.

Metro DC VA MD Area (YTD)

Direct Vacancy 13.0% 15.7% 13.4% 14.3% (1Q 2021)

Total Vacancy 14.1% 16.7% 14.5% 15.3% (1Q 2021)

Total Net Absorption -1,195,165 -2,266,726 729,706 -2.7 M SF (YTD 2021)

Leasing Activity 1,244,811 1,302,837 615,820 3.2 M SF (YTD 2021)

Market Outlook / COVID-19

Market fundamentals for the Metropolitan The ongoing COVID-19 pandemic’s effects on Washington, DC office market continued to weaken commercial real estate, and daily life, continues into the first quarter of 2021. Approximately -2.7 to persist, but there is some light at the end of million square feet was absorbed in the first the tunnel. Three vaccines have been approved quarter, representing a 69% increase of negative and are becoming readily available at vaccination net absorption from the fourth quarter 2020. While centers across the region. DC has begun easing vacancy increased and absorption decreased attendance/capacity restrictions on sporting further in DC and Northern Virginia, Suburban venues, museums, and nonessential retail. Regional Maryland experienced a slight rebound. Lead by schools have pivoted to more in-class learning as the delivery of a couple of large fully leased and well. These positive changes will not impact the occupied buildings, Suburban Maryland posted market overnight, however. Upticks in vacancy and positive absorption for the quarter and a decrease decreased net absorption are expected during the in vacancy. Leasing activity in Metro DC remained first half of 2021, with a gradual market rebound flat quarter over quarter, while investment sales potentially sometime in late 2021. dropped significantly with approximately $274 million in trades. Capital markets are expected to The GSA will continue to focus on outstanding have limited activity near-term. As of February leases and ways to cut costs. Cost-cutting measures 2021, the DC region’s unemployment rate improved will include focusing on executing longer-term to 5.7%, outpacing the national unemployment leases, embracing long-term telework/remote rate of 6.2%. The DC Metro currently ranks 23rd work options for agency employees, and pursuing nationally in unemployment among large MSAs. leasing options in green buildings (to lower energy consumption).

Leasing activity totaled 3.16 million square feet in 1Q 2020 (virtually identical to the 3.20 million square feet leased in 4Q 2020). However, compared to 1Q 2020 pre- COVID, this represents a 42% decrease in activity. While current leasing is down compared to pre-COVID activity, renewals and extensions contributed to the majority of leases executed on a square foot basis in Metro DC in 1Q 2021. In DC, the public sector (DC Gov’t and GSA) comprised the larger leases signed, while technology companies, such as MicroSoft and Sky Solutions, lead the way in Northern Virginia and medical tenants, like TCR2 and NIH, dominated in Suburban Maryland.

Metro DC 1Q Leasing Activity Lease Type

DC 1.30 M SF 1.24 M SF Renewal/Extension MD 1.54 M SF 1.62 M SF New/Relet/Sublease VA

616,000 SF

Market Summary 1Q 2021 4Q 2020 1Q 2020 The Washington, DC office market currently consists of 803 buildings, over 25,000 square feet, totaling approximately 152.8 million square feet of Direct 13.0% 12.4% 12.0% rentable space. Vacancy

As of February 2021, the unemployment rate for the District of Columbia decreased to 7.6% and the Total 14.1% 13.6% 13.0% Washington, DC Metropolitan area decreased to Vacancy 5.7%. The national unemployment rate decreased to 6.2%. Net The DC Metropolitan Statistical Area (MSA) -1.2 M -685,166 30,454 lost 227,200 jobs from Feb 2020-Feb 2021, Absorption (SF) representing a contraction of 6.8% YOY. However, 145,700 new jobs have been added since May Leasing 2020, representing 4.9% growth. 1.2 M 1.4 M 1.9 M Activity (SF) The largest public sector lease executed this quarter was a long-term renewal by the DC Department of Health for 205,860 square feet at Under 1.9 M 2.1 M 2.2 M 899 N. Capitol Street, NE. Construction (SF)

The Biotechnology Innovation Organization (BIO) executed the largest private sector lease with a U/C Percent 53% 58% 60% 60,809-square-foot transaction at 1201 New York Pre-Leased Avenue, NW.

Only two buildings traded this quarter, totaling $149,550,000. 1350 Eye Street, NW sold at auction, Deliveries (SF) 188,840 0 1.1 M while 1307 New York Avenue, NW was a partial interest transfer. Asking Rental Rates $53.44 $53.24 $53.79 Vacancy Rate (PSF, Full Service)

The total vacancy rate in DC increased to 14.1% at the end of the first quarter, totaling approximately 21.6 million square feet of vacant space. Sales Volume $149.6 M $559.4 M $970.5 M

At the end of the quarter, Class A total vacancy in DC was 13.9% (approx. 12.9 M SF) while Class B Unemployment 5.7% 5.8% 3.1% total vacancy was 15.3% (approx. 8.4 M SF). DC Metro Area

Sublet vacancy was 1.1% at the end of the first quarter, totaling approximately 1.7 million Sublease Space 3.4 M 3.6 M 3.0 M square feet of vacant space. A total of 3.4 million Available (SF) square feet of sublease is being marketed as available, however, this is a notable decrease of approximately 194,000 square feet since the end of the fourth quarter 2020.

Net Absorption & Deliveries | Net Absorption | Vacancy Rate

Leasing 6 16

5 14

The Washington, DC market recorded -1,195,165 4 12

square feet of net absorption in the first quarter, Vacancy (%) Rate a further drop from the -685,166 square feet 3 10 absorbed in the fourth quarter. All submarkets 2 8 SF (Millions) recorded negative net absorption for the quarter. 1 6

Tenants contributing to the negative net 0 4 absorption this quarter included the Bureau of -1 2 Land Management vacating 109,567 square feet -2 0 at 20 M Street, SE and the former owner/users '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 of 1307 New York Avenue, NW vacating the entire Deliveries Net Absorption Total Vacancy Rate 120,961-square-foot building.

The Central Business District (CBD) market posted -593,301 square feet of net absorption in the Leasing Activity first quarter, while the East End posted -366,830 14 square feet of net absorption for the quarter.

12 The Top Ten leases of the quarter ranged in size from 205,860 to 25,220 square feet. Five of the six 10 largest leases signed were public sector. 8

A total of 1,244,811 square feet of leases were 6 executed in the first quarter, with renewals SF Leased (Millions) SF Leased comprising roughly 49% of the leasing activity. 4 Historically, DC averages approximately 2.5 million square feet leased per quarter. 2

0 The DC Government accounted for 302,000 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 square feet, or 24%, of the total square footage leased in the first quarter. Deliveries | Under Construction Construction 6

Eight buildings were under construction in 5 Washington, DC at the end of the first quarter, totaling 1,867,804 square feet (53% pre-leased). 4

3 The bulk of the new construction, 1,234,235 square feet, is being built in NoMa, Capitol Riverfront, SF (Millions) 2 and at The Wharf. The remaining 633,569 square

feet is being developed in the downtown core 1 submarkets of CBD and East End.

0 250 M Street, SE (188,840 sf) delivered 93% leased '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 to the DC Department of Transportation. Deliveries Under Construction

Construction (cont’d) Sales Volume

Buildings expected to deliver in the second quarter $6 of 2021 include; 301 N St, NE (38,191 sf, 64% pre-

leased), 699 14th St, NW (164,569 sf, 0% pre- $5 leased), and 1255 Union St, NE/350 Morse St, NE

(226,841 sf, 0% pre-leased). $4

1275 New Jersey Ave, SE (330,000 sf, 88% pre- $3 leased) is scheduled to deliver in the fourth quarter 2021. $2 Sales Volume Sales Volume (Billions)

The Wharf Phase II includes two larger buildings; $1 670 Maine Avenue, SW (255,750 sf) and 680 Maine Avenue, SW (293,953 sf). These buildings are a $0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 combined 58% pre-leased to Williams & Connolly. A third building, 610 Water St, SW, is 89,500 square feet and 43% pre-leased to The Atlantic. All three buildings are expected to be completed by the Vacant Space Available & Vacancy by Class third quarter 2022.

16 15.3% 16 2100 Pennsylvania Ave, NW (469,000 sf, 67% pre- 13.9% 14 14 leased to WilmerHale) is scheduled for completion in late 2022. 12 12

10 10 Vacancy (%) 250 M Street, SE (188,840 sf) is the sole building to deliver so far in 2021, an additional 759,601 square 8 8 6 6 feet is expected to deliver by the end of the year. (Millions)SF Vacant 5.0% The 10-year average for new inventory added to 4 4 DC is 1.5 million square feet per year. 2 2

0 0 Outlook A B C

Market fundamentals for Washington, DC should remain relatively weak near-term, as vacancy is expected to increase further and net absorption to Sublease Space Available remain negative. Leasing activity is expected remain relatively flat as tenants continue to hold off on 4.0 4%

making long-term decisions on space requirements; 3.5 renewals and lease extensions should continue 3.0 3% to help drive leasing near-term. However, with Availability (%) Rate vaccines becoming readily available and schools 2.5

expected to pivot to more in-class learning, this 2.0 2% could lead to a noticeable increase of the work- SF (Millions) force returning to the office by the end of Summer 1.5 2021. These factors could contribute to the possible 1.0 1%

start of market recovery by the end of 2021. 0.5

0.0 0% 1Q '20 2Q '20 3Q '20 4Q '20 1Q '21

Sublease Avl (SF) Availability Rate (%)

Washington, D.C. Top Sales

1350 Eye St, NW 1307 New York Ave, NW 1899 Pennsylvania Ave, NW 1129 20th St, NW The Herald The Liberty Building Submarket East End Submarket CBD Submarket East End Submarket CBD Date Sold March 2021 Date Sold December 2020 Date Sold March 2021 Date Sold December 2020 $120,500,000 $103,000,000 Price $29,050,000 Price $84,830,000 ($301 PSF) Price ($539 PSF) Price MetLife Real ($343 PSF) Global ($482 PSF) Buyer Buyer Estate Buyer Invesco Advisers Securitization Buyer Monument Realty Seller EDGE Funds Seller Marx Realty Seller Paramount Group Seller Prologis RBA 399,794 SF RBA 120,961 SF RBA 191,106 SF RBA 176,071 SF Class A Class B Class A Class B Leased 78% Leased 0% Leased 90.4% Leased 100% Cap Rate n/a Cap Rate n/a Cap Rate N/A Cap Rate 9.22% Foreclosure, 70% Partial Notes building sold at Interest Transfer Notes auction to the Notes to Invesco, Marx lender, MetLife retained 30% ownership

1301 Connecticut Ave, NW 499 S. Capitol St, SW 1227 25th St, NW 600 5th St, NW Fairchild Building Jackson Graham Building Submarket CBD Submarket West End Submarket Southwest Submarket East End Date Sold October 2020 Date Sold December 2020 Date Sold December 2020 Date Sold December 2020 $28,277,388 $53,500,000 Price $86,430,000 Price ($474 PSF) Price ($395 PSF) Price Undisclosed Alduwaliya Asset ($459 PSF) Alduwaliya Asset Stonebridge Buyer Buyer Management Buyer Boyd Watterson Management Buyer Assoc. & Seller Shorenstein Marfair Joint Seller WashREIT Rockefeller Group Seller Venture RBA 59,622 SF RBA 135,475 SF Seller WMATA RBA 188,375 SF Class B Class A RBA 381,000 SF Class B Leased 66.7% Leased 85.2% Class C Leased 99.3% Cap Rate 5.50% Leased 100% Cap Rate 6.35% Cap Rate N/A Notes

Top Ten Leases

In the first quarter 2021 there were six renewals, NE, the GSA-FBI signed a two-year extension at three new leases, and one extension in the Top 616 H Street, NW, and the DC DGS signed for 53,372 Ten, including two leases over 100,000 square feet square feet and 42,289 square feet at 100 M Street, (both were in the public sector). SE and 1015 Half Street, SE respectively.

The largest lease executed in the public sector this Two law firms renewed this quarter; Foley Hoag quarter was a 205,860-square-foot renewal by the (33,178 sf at 1717 K St, NW) and Thompson Coburn DC Department of Health at 899 N. Capitol Street, (25,220 sf at 1909 K St, NW). NE. Biotechology Innovation Organization (BIO) executed the largest private sector lease with a The Washington, DC market totaled 1,244,811 60,809-square-foot signing at recently renovated square feet of leasing activity in the first quarter; 1201 New York Avenue, NW (BIO will relocate from down 10.7% from the fourth quarter. Historically, its current 1201 Maryland Ave, SW address). DC averages approximately 2.5 million square feet leased per quarter. The public sector signed 5 out of the largest 6 leases this quarter. Along with the DC DOH, the GSA Renewals and extensions totaled 607,202 square - VA renewed 131,454 square feet at 1100 1st Street, feet, or 48.7%, of leasing this quarter.

899 N. Capitol Street, NE 1015 Half Street, SE Union Square - South DC Department of DC Department of Tenant Tenant General Services Health Size 42,289 SF Size 205,860 SF Type New Type Renewal

1100 1st Street, NE 1717 K Street, NW GSA - Department of Tenant Tenant Foley Hoag Veterans Affairs Size 33,178 SF Size 131,454 SF Type Renewal Type Renewal

1201 New York Avenue, NW 300 M Street, SE Tenant BIO Tenant CACI

Size 60,809 SF Size 32,812 SF

Type New Type Renewal

616 H Street, NW 1909 K Street, NW Tenant GSA - FBI Tenant Thompson Coburn

Size 57,888 SF Size 25,220 SF

Type Extension Type Renewal

100 M Street, SE 1025 Connecticut Ave, NW DC Department of Tenant Tenant WDG Architecture General Services Size 25,000 SF Size 53,372 SF Type Renewal Type New

CBD 1st Quarter 2021

1.25 18

1.00 16 0.75 14 0.50 12 0.25 0.00 10 -0.25 8 SF (Millions)

-0.50 Rate (%) Vacancy 6 -0.75 4 -1.00 2 -1.25 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 Under Total Net Deliveries Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2011 - 2020) Net Absorption 1,091 SF / Year Total vacancy in the CBD market increased to 16.8% at the end of the first quarter, up from 15.4% Deliveries 295,299 SF / Year at the end of the fourth quarter.

The CBD recorded -593,301 square feet of net Leasing Activity 2,953,881 SF / Year absorption in the first quarter, a further drop from the -415,333 square feet absorbed in the fourth Market Stats quarter. Tenants contributing to the negative net absorption included Morrison & Foerster vacating Inventory 45.4 M SF 151,342 square feet at 2000 Pennsylvania Avenue, NW and Cooley vacating 125,426 square feet at Direct Vacancy 15.3% 1200 New Hampshire Avenue, NW.

16.8% A total of 271,491 square feet was leased in the first Total Vacancy quarter, an increase from the 244,833 square feet leased in the previous quarter. Tenants executing YTD 2021 Absorption -593,301 SF leases this quarter included Foley Hoag renewing 33,178 square feet at 1717 K Street, NW, Thompson YTD 2021 Leasing Activity 271,491 SF Coburn renewing 25,220 square feet at 1909 K Street, NW, and MotoRefi signing for 17,850 square Under Construction 469,000 SF feet at 1717 Rhode Island Avenue, NW. Percent Pre-Leased 67% 2100 Pennsylvania Avenue, NW (469,000 sf, 67% pre-leased to WilmerHale) is the sole building YTD 2021 Deliveries 0 SF currently under construction in the CBD and is expected to deliver second quarter 2022. Asking Rental Rates 2011: 2020: YTD 2021: (PSF, Full Service) $49.59 $53.46 $54.05

East End 1st Quarter 2021

3.0 16

2.5 14

2.0 12

1.5 10 1.0 8 0.5 SF (Millions) 6 Vacancy Rate (%) Vacancy 0.0 4 -0.5 2 -1.0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 Under Total Net Deliveries Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2011 - 2020) Total vacancy in the East End market increased to Net Absorption 122,893 SF / Year 15.9% at the end of the first quarter, up from 15.5% at the end of the fourth quarter. Deliveries 471,703 SF / Year

The East End recorded -366,830 square feet of Leasing Activity 3,735,191 SF / Year net absorption in the first quarter, a further drop from the -179,155 square feet absorbed in the Market Stats fourth quarter. Contributing to the negative net absorption included the former owner/users (a Inventory 53.0 M SF JV of education associations) of 1307 New York Ave, NW vacating 120,961 square feet (the entire Direct Vacancy 14.5% building) and Spaces closing its location at 1441 L Street, NW and giving back 50,852 square feet. 15.9% Total Vacancy A total of 410,025 square feet was leased in the first quarter, down from the 687,503 square feet YTD 2021 Absorption -366,830 SF leased in the previous quarter. Tenants executing leases this quarter included Biotechnology YTD 2021 Leasing Activity 410,025 SF Innovation Organization (BIO) signing for 60,809 square feet at 1201 New York Avenue, NW Under Construction 164,569 SF (relocating from 1201 Maryland Avenue, SW), the GSA - FBI signing a two-year extension for 57,888 Percent Pre-Leased 0% square feet at 616 H Street, NW, and Fincantieri Marine Group signing for 20,102 square feet at 655 YTD 2021 Deliveries 0 SF 15th Street, NW.

Asking Rental Rates 2011: 2020: YTD 2021: 699 14th Street, NW (164,569 sf, 0% pre-leased) (PSF, Full Service) $52.66 $55.55 $55.54 is currently the sole building under construction in the East End; scheduled to deliver June 2021.

CBD / East End Class A 1st Quarter 2021

3.0 18

2.5 16 14 2.0 12 1.5 10

1.0 8 SF (Millions)

0.5 Rate (%) Vacancy 6

4 0.0 2 -0.5 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 Under Total Net Deliveries Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2011 - 2020) Net Absorption 492,700 SF / Year Total vacancy in the CBD / East End Class A market increased to 16.1% at the end of the first quarter, up Deliveries 767,001 SF / Year from 15.6% at the end of the fourth quarter.

The Class A market of the CBD / East End recorded Leasing Activity 4,014,809 SF / Year a net decrease of sublease space available due to some larger blocks going direct or being withdrawn Market Stats from the market. At the end of the first quarter, a total of 1,612,039 square feet of Class A sublease Inventory 58.2 M SF was available.

Direct Vacancy 14.5% The Class A market recorded -308,697 square feet of net absorption in the first quarter. Tenants 16.1% contributing to the negative net absorption Total Vacancy included Cooley vacating 125,426 square feet at 1200 New Hampshire Avenue, NW and Spaces YTD 2021 Absorption -308,697 SF closing and vacating its 50,852-square-foot location at 1441 L Street, NW. YTD 2021 Leasing Activity 481,273 SF

Leasing activity totaled 481,273 square feet in the Under Construction 633,569 SF first quarter. Tenants executing leases included Womble Bond Dickinson signing for 18,026 square Percent Pre-Leased 50% feet at 2001 K Street, NW and New Skies Satellites renewing 16,953 square feet at 1129 20th Street, YTD 2021 Deliveries 0 SF NW.

Asking Rental Rates 2011: 2019: YTD 2021: Two buildings remained under construction; 699 (PSF, Full Service) $54.75 $58.20 $58.59 14th Street, NW (164,569 sf, 0% pre-leased), and 2100 Pennsylvania Avenue, NW (469,000 sf, 67% pre-leased).

CBD / East End Class B 1st Quarter 2021

2.0 18

1.5 16

1.0 14 12 0.5 10 0.0 8 -0.5 SF (Millions)

Vacancy Rate (%) Vacancy 6 -1.0 4 -1.5 2 -2.0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 Under Total Net Deliveries Direct Vacancy Rate Total Vacancy Rate Construction Absorption

Highlights 10 Year Averages (2011 - 2020) Net Absorption -366,919 SF / Year The vacancy rate in the CBD / East End Class B market increased to 17.4% the end of the first Deliveries 0 SF / Year quarter.

Class B buildings in the CBD / East End recorded Leasing Activity 2,658,123 SF / Year a net decrease of sublease space available due to some larger blocks going direct or being withdrawn Market Stats from the market. At the end of the first quarter, a total of 822,756 square feet of Class B sublease Inventory 38.8 M SF was available.

Class B buildings recorded a total of -651,994 Direct Vacancy 16.1% square feet of net absorption in the first quarter. Tenants contributing to the negative net Total Vacancy 17.4% absorption included Morrison & Foerster vacating 151,342 square feet at 2000 Pennsylvania Avenue, YTD 2021 Absorption -651,994 SF NW and the former owners/users of 1307 New York Avenue, NW vacating the entire 120,961-square- YTD 2021 Leasing Activity 163,902 SF foot building. Under Construction 0 SF Leasing activity totaled 163,902 square feet in the first quarter. Tenants executing leases included Percent Pre-Leased 0% WDG Architecture renewing 25,000 square feet at 1025 Connecticut Avenue, NW, National Press Club YTD 2021 Deliveries 0 SF renewing 11,608 square feet at 529 14th Street, NW, and Information Industry Association signing for Asking Rental Rates 2011: 2020: YTD 2021: 5,195 square feet at 1620 Eye Street, NW. (PSF, Full Service) $45.58 $50.02 $50.10

Southwest 1st Quarter 2021

1.50 16 1.25 14 1.00 12 0.75 0.50 10 0.25 8 0.00 SF (Millions) 6

-0.25 Rate (%) Vacancy -0.50 4 -0.75 2 -1.00 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 Deliveries Under Total Net Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2011 - 2020) Net Absorption 175,573 SF / Year Total vacancy in the Southwest market increased to 10.7% at the end of the first quarter, up from Deliveries 108,195 SF / Year 10.5% at the end of the fourth quarter.

The Southwest recorded -26,724 square feet of Leasing Activity 897,824 SF / Year net absorption in the first quarter, down from the 38,361 square feet absorbed in the fourth quarter. Market Stats Tenants contributing to the negative absorption included Energetics vacating 13,338 square feet at Inventory 12.4 M SF 901 D Street, SW.

Direct Vacancy 10.6% A total of 2,959 square feet was leased in the first quarter, down substantially from the 308,339 10.7% square feet leased in the previous quarter. Total Vacancy

Three buildings are currently under construction YTD 2021 Absorption -26,724 SF in Southwest and all are located at The Wharf. The two larger buildings; 670 Maine Avenue, SW YTD 2021 Leasing Activity 2,959 SF (255,750 sf) and 680 Maine Avenue, SW (293,953 sf) are 58% pre-leased to Williams & Connolly Under Construction 639,203 SF (Williams & Connolly has pre-leased all of 680 Maine and only a small portion of 670 Maine). A Percent Pre-Leased 56% third building, 610 Water Street, SW, totals 89,500 square feet and is 43% pre-leased to The Atlantic. YTD 2021 Deliveries 0 SF All three buildings are expected to be completed by the third quarter 2022. Asking Rental Rates 2011: 2020: YTD 2021: (PSF, Full Service) $50.92 $49.08 $49.58 WMATA’s new headquarters at 300 7th Street, SW (227,000 sf) remains under renovation (expected to be completed in the first quarter 2022); 62,300 square feet remains available for lease.

West End / Georgetown 1st Quarter 2021

0.50 14

12 0.25 10

8 0.00

6 SF (Millions) Vacancy Rate (%) Vacancy

-0.25 4

2 -0.50 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 Under Total Net Deliveries Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2011 - 2020) Net Absorption 11,046 SF / Year Total vacancy in the West End / Georgetown market increased to 12.1% at the end of the first Deliveries 45,883 SF / Year quarter, up from 12.0% at the end of the fourth quarter. Leasing Activity 537,162 SF / Year The West End / Georgetown recorded -4,362 square feet of net absorption in the first Market Stats quarter, an improvement from the -34,312 square feet absorbed in the fourth quarter. Inventory 7.9 M SF A total of 28,948 square feet was leased in the Direct Vacancy 11.0% first quarter, an increase from the 21,661 square feet leased in the previous quarter. Leases 12.1% executed this quarter included Generali signing Total Vacancy for 18,610 square feet at 1250 24th Street, NW and MicroHealth signing a 6,738-square-foot YTD 2021 Absorption -4,362 SF sublease at 2600 Virginia Avenue, NW - The Watergate. YTD 2021 Leasing Activity 28,948 SF

Under Construction 0 SF

Percent Pre-Leased 0%

YTD 2021 Deliveries 0 SF

Asking Rental Rates 2011: 2020: YTD 2021: (PSF, Full Service) $42.17 $49.54 $49.21

Capitol Hill / NoMa 1st Quarter 2021

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 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 Under Total Net Deliveries Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2011 - 2020) Net Absorption 403,509 SF / Year Total vacancy in the Capitol Hill / NoMa market increased to 9.9% at the end of the first quarter, Deliveries 372,170 SF / Year up from 9.6% at the end of the fourth quarter.

Capitol Hill / NoMa recorded -94,865 square feet Leasing Activity 1,089,363 SF / Year of net absorption in the first quarter, down from the -58,112 square feet absorbed in the fourth Market Stats quarter. Tenants contributing to the negative absorption included U.S. Immigration & Customs Inventory 18.6 M SF Enforcement (ICE) vacating 34,773 square feet at 1200 1st Street, NE. Direct Vacancy 9.2% A total of 370,619 square feet was leased in the 9.9% first quarter, an notable increase from the 95,610 Total Vacancy square feet leased in the previous quarter. Leases executed this quarter included DC Department YTD 2021 Absorption -94,865 SF of Health renewing 205,860 square feet at 899 N. Capitol Street, NE, GSA - Veterans Affairs YTD 2021 Leasing Activity 370,619 SF renewing 131,454 square feet at 1100 1st Street, NE, and T. Rowe Price signing for 20,000 square feet Under Construction 265,032 SF at 200 Massachusetts Avenue, NW. Percent Pre-Leased 10% Two buildings are currently under construction. 301 N Street, NE - Press House (38,191 sf, 64% pre- YTD 2021 Deliveries 0 SF leased to Hickok Cole) and 1255 Union Street, NE (350 Morse Street, NE) - Signal House (226,841 sf, Asking Rental Rates 2011: 2020: YTD 2021: 0% pre-leased); both are expected to deliver in (PSF, Full Service) $50.15 $51.26 $50.12 the second quarter 2021.

Capitol Riverfront 1st Quarter 2021

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 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 0 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 Deliveries Under Total Net Construction Absorption Direct Vacancy Rate Total Vacancy Rate

Highlights 10 Year Averages (2011 - 2020) Net Absorption 88,011 SF / Year Total vacancy in the Capitol Riverfront market increased to 11.9% at the end of the first quarter. Deliveries 38,278 SF / Year The Capitol Riverfront recorded -28,761 square feet of net absorption in the first quarter, down Leasing Activity 247,557 SF / Year from the -2,321 square feet absorbed in the fourth quarter. Tenants contributing to the negative Market Stats absorption included Bureau of Land Management vacating 109,567 square feet at 20 M Street, SE Inventory 4.6 M SF (relocated to Kansas City, MO).

Direct Vacancy 11.1% A total of 146,728 square feet was leased in the first quarter, up from the 12,020 square feet 11.9% leased in the previous quarter. Tenants executing Total Vacancy leases this quarter included the DC Department of General Services signing for 53,372 square feet at YTD 2021 Absorption -28,761 SF 100 M Street, SE. YTD 2021 Leasing Activity 146,728 SF 250 M Street, SE (188,840 sf) delivered 93% leased to DC DOT. DC DOT vacated approximately Under Construction 330,000 SF 170,000 square feet at neighboring 55 M Street and moved into 176,000 square feet at 250 M. Percent Pre-Leased 88%

One building remained under construction at YTD 2021 Deliveries 188,840 SF the end of the quarter; 1275 New Jersey Avenue, SE - The Yards (330,000 sf, 88% pre-leased to Asking Rental Rates 2011: 2020: YTD 2021: Chemonics). The building is expected to deliver (PSF, Full Service) $47.84 $55.50 $57.05 in the fourth quarter 2021. Chemonics recently placed 75,000 square feet of it’s pre-leased space on the market for sublease.