Q4 2022 Industrial Space Report: Washington, D.C.
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Washington, D.C. is renowned for its history and iconic architecture, from the Washington Monument to the White House. It’s also home to several Fortune 500 companies, such as Fannie Mae and The Carlyle Group.
Unemployment in the city slightly declined quarter-over-quarter to 2.9%, a 0.1% decrease from Q3 2022.
From 2021 to 2022, the metro population increased by approximately 56,000 residents, a 1.03% increase.
As 2022 came to a close for Washington, D.C. industrial real estate, vacancies declined, rents held steady, and absorption decreased.
General Area Overview & Demographics
Washington, D.C. is a highly diverse city with approximately 700,000 people. The racial and ethnic makeup of the city’s population is 47% White, 43% Black or African American, 8% Asian, 2% from two or more races, and 1% from some other race.
Washington, D.C. Median Household Income & Population
Median household income in 2019 was $84,523. This figure is significantly higher than the national average of $57,652 and reflects the high proportion of highly paid-government workers and professionals in the area.
The city is home to a diverse range of age groups, with the median age being 34.6 years old as of 2019. The population under 18 comprises 24.5% of the total population, while people aged 65 and older comprise 10.3%. This is slightly smaller than the national average of 18.
Washington, D.C. is home to 16 universities and colleges, including Georgetown University, George Washington University, American University, and Howard University.
One of the most recognizable landmarks in the city is The Washington Monument, which stands 555 feet tall and is the world’s tallest obelisk. It is also home to other cultural and historical attractions, including the National Mall, Memorial Parks, and Smithsonian Institution museums.
The city has a humid subtropical climate characterized by hot and humid summers and cool to mild winters with occasional snowfall. Summer reaches an average of 89°F high and a low of 73 °F, while winter averages 44°F to 27°F.
Summary of Washington, D.C. Industrial Real Estate Performance in Q4 2022
Total vacancy was 3.6% for Washington D.C.’s industrial real estate.
Southeast Fairfax and Lanham/Greenbelt held higher vacancy rates at 5.9% and 5.7%, respectively.
Submarkets Herndon/Reston and Northern Prince George’s County posted the lowest with 1.8% vacancy each.
Quarterly absorption reached around 740,000 square feet. This brought the total to 2.1 million square feet absorbed for 2022.
The most positive absorption in Q4 came from suburban Maryland, accounting for over 713,000 square feet.
Montgomery County, College Park, Southeast Fairfax, Dulles North, and Alexandria/Arlington ended Q4 with negative absorption.
What are industrial rents like in Washington, D.C.?
Rents averaged $13.11 per square foot for Washington, D.C. industrial real estate.
Greater Fairfax/Falls Church’s asking rents averaged $17.31 per square foot, the highest in the region.
Northern Prince George’s County and Frederick County were the lowest and, additionally, the only submarkets where the median rent was below $10, posting $9.93 and $9.81, respectively.
Purchase & Leasing Activity
Overall sales volume totaled $19.7 million across five transactions in Q4, while Q3 reached $260 million over 25 transactions.
The average sales price was approximately $158 per square foot. Q4 of 2022 marked the lowest sales volume throughout the year.
There were over 398,000 square feet of new leasing activity in the fourth quarter, bringing 2022’s total to 2.2 million square feet.
Warehouse/distribution space accounted for over 50% of all new leasing activity, posting over 1.7 million square feet. Prince George County was responsible for nearly all of those transactions.
Notable Industrial Real Estate Deals in Washington, D.C. in Q4 2022
There were several deals that took place for Washington, D.C.’s industrial real estate in Q4 2022:
- The Pinkard purchased 82,000 square feet for $8.5 million.
- DRS Signal Solution leased 88,000 square feet.
- NASA leased 48,000 square feet.
These are select examples among other activity.
New Industrial Real Estate Development Activity in Washington, D.C. in Q4 2022
The construction pipeline brought over 790,000 square feet of industrial space online for Washington, D.C.’s market.
One of those deliveries was Capital Electric’s 362,880-square-foot expansion.
Completions for 2022 reached 2.3 million square feet of new product. This left 2.7 million square feet in the pipeline going into 2023.
Market Forecast for Washington, D.C.’s Industrial Real Estate Market
While Q4 2022 was lackluster, the overall trend for Washington, D.C.’s industrial real estate has been record-breaking.
Rents have sharply increased since 2020, the construction pipeline is at some of the highest levels it has ever been, and absorption has remained positive.
Although activity dropped as 2022 ended, demand should continue to match supply throughout 2023, causing vacancy to decline and rents to rise further.
Takeaways for Industrial Real Estate Investors
Washington, D.C.’s industrial real estate market has been trending positively throughout the last few years.
Investors looking for an opportune industrial market with healthy recent history should consider Washington, D.C. as an option.
Do your research, stay diligent, and invest wisely.
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