707 ED-2.1 THE OFFICE ECONOMY

707.1 The District has one of the largest inventories of office space in the nation. In 2006, there were 112 million square feet of office space, which grew over the next 10 years to over 142 million square feet. Among American cities, only Manhattan has a larger inventory of Class A office space within a central business district. By most indicators, the District’s office market is performing well. Its vacancy rate is competitive with other growing office markets but historically high at 11.4 percent in 2018. The average asking rent was above $60 per square foot, which is among the highest in the nation, only trailing the New York City and San Francisco Bay Area office markets.

707.2 Central Washington includes a number of submarkets, each providing different amenities and locational advantages. The largest of these submarkets are downtown (traditionally defined as the area east of 16^th Street and south of Massachusetts Avenue) and the Golden Triangle (extending from 16^th Street west to Foggy Bottom and north to Dupont Circle). Smaller office districts exist in Georgetown, on Capitol Hill, along the avenues of Upper Northwest Washington, and around L’Enfant Plaza. The fastest growth rates within the District’s submarkets has occurred in the Capitol Riverfront and North of Massachusetts Avenue (NoMA) areas. The large geographic expanse of the District’s office market has been driven at least partially by building height limits and the sizeable area dedicated to federal uses and open space in the heart of Washington, DC.

707.3 Washington, DC’s long established business districts, such as downtown and the Golden Triangle, are entering a phase of remodeling and redevelopment. As a result, office development is pushing east toward Union Station and NoMA areas, and south into Capitol Riverfront. Almost five million square feet of office space is now under construction in Washington, DC, much of it in these areas.

See also the Central Washington Element for more information on the Golden Triangle/K Street Area.

707.4 Although the District’s commercial land supply is adequate to accommodate forecasted job growth through 2045, the market faces a number of challenges to its continued high performance. Absorption has been modest with an average of 635,000 square feet per year between 2011 and 2016. Over this period, office space has become more intensively used with less dedicated space-per-employee, less on-site document storage, and fewer in-building facilities, such as legal libraries. Denser office configurations are driven by demand for trophy-class office space by businesses seeking newer office formats that feature higher-quality interior architecture and more generous shared space. These newer office configurations accommodate significantly more people per square foot than their predecessors. As a consequence, these new office building formats are

contributing to higher vacancy rates, as the District's office market accommodates significantly more employees while adding modest amounts of net new office space. Telework trends, accelerated by the work-from-home restrictions of the pandemic, are also reshaping office space needs.

707.5 At the same time, some of the existing space in Central Washington has reached the end of its economic life and is in need of renovation or replacement. The Base Realignment and Closure (BRAC) program, which has generated new office districts such as Capitol Riverfront, has been one of the most significant drivers in the District's office market since 2006. Going forward, there will be a need for strategies to retain existing office tenants and to attract new tenants through creative marketing.

707.5a Text Box: The Impact of Base Realignment and Closure (BRAC)

The Department of Defense periodically reorganizes America's military infrastructure to more effectively and efficiently support its operations. This may result in the redeployment of personnel to new sites, the development of new facilities, and the closure of military bases across the United States. The latest round, announced in 2005 closed the Walter Reed Hospital campus, located between Georgia Avenue NW and 16th Street NW. Additionally, operations at Washington Navy Yard and Bolling Air Force Base were significantly realigned.

707.5b The indirect impacts of BRAC have been even greater than the direct impacts. Specifically, updated Department of Defense security standards required millions of square feet of space in Arlington and Alexandria to be vacated; contractors and federal tenants moved to secure facilities at Fort Belvoir and elsewhere.

707.5c These closures have had a destabilizing impact, but it is also clear that they will generate positive impacts. For example, land transferred from federal ownership to the District is creating new economic development opportunities for the District at sites such as the former Walter Reed campus. Additionally, in 2018, Amazon announced that it would locate its second headquarters in Crystal City, where it will repurpose buildings vacated by BRAC to host at least 25,000 employees. Securing the second headquarters in Northern Virginia is expected to strengthen the region's economic diversification by attracting, growing, and retaining technology-oriented businesses.

707.6 Policy ED-2.1.1: Office Growth

Plan for an office sector that will continue to accommodate government agencies and growth in government contractors, legal services, international business, trade associations, and other service-sector office industries. The primary location for this growth should be in Central Washington and the adjoining office centers, including NoMa, Capitol Riverfront, Buzzard Point, St. Elizabeths, and Poplar Point.

707.7 Policy ED-2.1.2: Corporate Headquarters

Promote the qualities that favor the District as a headquarters or branch setting for multinational corporations, including its economic, social, political, and locational attributes. Focus on companies that contract with the federal government but are currently headquartered elsewhere and companies that would benefit from proximity to regulators. Construct performance-based incentive packages to encourage large corporations to locate and maintain their offices in the District.707.8 Policy ED-2.1.3: Signature Office Buildings

Emphasize opportunities for build-to-suit/signature office buildings in order to accommodate tenants and users such as corporate headquarters that require premium office space.707.9 Policy ED-2.1.4: Diversified Office Options

Diversify the tenant base by attracting premium , mid-range, and low-cost office space users, and by supporting a range of office space types. Recognize that many firms may prefer low-cost space over premium office space.707.10 Policy ED-2.1.5: Infill and Renovation

Support the continued growth of the office sector through infill and renovation within established commercial districts to more efficiently use available space while providing additional opportunities for new space.707.11 Policy ED-2.1.6: Local-Serving Office Space

Encourage the development of small local-serving offices and coworking facilities within neighborhood commercial districts throughout Washington, DC to provide relatively affordable locations for small businesses and local services (such as real estate and insurance offices, accountants, consultants, and medical offices).707.12 Policy ED-2.1.7: Lower-Cost and Flexible Office Space

Support innovations such as shared office space, hoteling, and incubators as methods to support lower-cost office space and reduce office vacancy rates. Consider techniques such as tax incentives and regulatory flexibility.707.13 Action ED-2.1.A: Marketing Programs

Implement marketing strategies for the District's commercial space, working collaboratively with local economic development organizations such as the Washington, DC Economic Partnership, Greater Washington Partnership, Federal City Council, Greater Washington Board of Trade, and DC Chamber of Commerce. The program should be conducted on an ongoing basis, focusing on companies that are headquartered elsewhere but conduct extensive business with the federal government, including legal firms, national membership organizations, technology-intensive industries, and the domestic offices of international firms.

707.14 Action ED-2.1.B: Support Low-Cost Office Space

Explore the feasibility of financial or regulatory support to encourage the development of lower-cost office space, including coworking space for small or nonprofit businesses in underinvested commercial districts outside downtown.

707.15 Action ED-2.1.C: Supporting Entrepreneurship

Facilitate entrepreneurship, including through mentorship, technical assistance, incubators, and pro bono partnerships that will help aspiring entrepreneurs access resources and increase the likelihood of establishing a successful small business.

707.16 Action ED-2.1.D: Anchor Commercial Expansion

District agencies leasing new space will give priority to locations in Wards 7 and 8, where they can anchor commercial development, including fresh food retail. OP and the Deputy Mayor for Planning and Economic Development (DMPED) should support the location of District facilities in these areas through analysis of land use plans and public lands.

SOURCE: District of Columbia Comprehensive Plan Act of 1984, effective April 10, 1984 (D.C. Law 5-76; 31 DCR 1049 (March 9, 1984)); as amended by District of Columbia Comprehensive Plan Act of 1984 Land Use Element Amendment Act of 1984, effective March 16, 1985 (D.C. Law 5-187; 32 DCR 873 (February 15, 1985)); as amended by District of Columbia Comprehensive Plan Amendments Act of 1989, effective May 23, 1990 (D.C. Law 8-129; 37 DCR 55 (January 5, 1990)); as amended by District of Columbia Comprehensive Plan Amendments Act of 1989 NCPC-Recommended Amendments, and Closing of Public Alleys in Square 669, S.O. 88-452, Act of 1990, effective May 23, 1990 (D.C. Law 8-132; 37 DCR 2213 (April 6, 1990)); as amended by District Government Land Use Temporary Amendment Act of 1994, effective October 1, 1994 (D.C. Law 10-190; 41 DCR 5360 (August 12, 1994)); as amended by Comprehensive Plan Amendments Act of 1994, effective October 6, 1994 (D.C. Law 10-193; 41 DCR 5536 (August 19, 1994)); as amended by District of Columbia Comprehensive Plan Act of 1984 Land Use Amendment Act of 1994, effective March 21, 1995 (D.C. Law 10-235; 42 DCR 30 (January 6, 1995)); as amended by Technical Amendments Act of 1996, effective April 18, 1996 (D.C. Law 11-110; 43 DCR 530 (February 9, 1996)); as amended by Second Technical Amendments Act of 1996, effective April 9, 1997 (D.C. Law 11-255; 44 DCR 1271 (March 7, 1997)); as amended by Comprehensive Plan Amendment Act of 1998, effective April 27, 1999 (D.C. Law 12-275; 46 DCR 1441 (February 19, 1999)); as amended by Technical Amendments Act of 1999, effective April 12, 2000 (D.C. Law 13-91; 47 DCR 520 (January 28, 2000)); as amended by Comprehensive Plan Amendment Act of 2006, effective March 8, 2007 (D.C. Law 16-300; 54 DCR 924 (February 2, 2007)); as amended by Technical Amendments Act of 2008, effective March 25, 2009 (D.C. Law 17-353; 56 DCR 1117 (February 6, 2009)); as amended by Comprehensive Plan Amendment Act of 2010, effective April 8, 2011 (D.C. Law 18-361; 58 DCR 908 (February 4, 2011)); as amended by Comprehensive Plan Amendment Act of 2021, effective August 21, 2021 (D.C. Law 24-20; 68 DCR 006918 (July 16, 2021)).