Washington D.C.'s office market is splitting into two tiers. Premium properties are attracting tenants while secondary buildings struggle to find occupiers.
The city logged roughly 2 million square feet of office leasing in the second quarter, Savills reports. This marks the highest quarterly volume since 2024. Law firms drove much of the activity, signing leases for about 600,000 square feet alone. Several large occupiers completed major transactions as well.
The catch: this strength concentrates almost entirely in trophy-class buildings. Class A properties in prime locations pull in tenants and command competitive rents. Class B and C offices, particularly those without recent renovations or in secondary locations, remain empty or struggle with concessions.
For landlords, the message is clear. Owners of well-maintained, strategically positioned buildings in central business districts like the Golden Triangle and NoMa benefit from strong demand. Owners of aging or out-of-the-way properties face prolonged vacancy periods and pressure to cut rents or offer tenant improvement packages just to fill space.
Tenants shopping for deals find advantage in secondary markets. Landlords of B and C buildings negotiate harder on rates and fit-out costs. Premium tenants can cherry-pick from the best addresses, but mid-market firms get pricing leverage elsewhere.
The law firm concentration reflects broader Washington dynamics. Large legal practices continue consolidating office needs, and they gravitate toward prestige addresses that support client perception and talent retention. Firms seeking cost savings or flexibility lean toward Class B conversions or shared spaces.
D.C.'s office recovery will likely remain bifurcated through 2025. Trophy properties will stabilize at higher occupancy rates and rents. Secondary stock will either convert to residential, mixed-use, or data center uses, or remain underutilized. Landlords cannot ignore this divergence.