DC Office Vacancy in 2025: The New High
As 2025 closed, Washington, DC office vacancy climbed to a record 20.4%. That puts the city above the national average vacancy rate of 18.6%.
Vacancy Spike Signals Disruption
The rate rose 50 basis points from Q3 and 100 basis points year over year.
Earlier in 2025, the direct vacant available rate was 15.7% in Q2.
It then accelerated sharply late in the year.
CBRE measured 22.5% in Q4.
Annual net absorption fell to negative 1.7 million square feet.
Class B buildings bore the brunt, with Class B vacancy rising 250 basis points in Q4.
Market Stress Reaches Budgets
Leasing and rents
Tenants leased 7.1 million square feet in 2025.
That was about 10% below the ten year average.
District asking rents ended 2025 at $57.19 per square foot, up 1.9%.
Empty space continued to threaten municipal revenues.
Reduced daytime occupancy also weakened retail spillover near the central business district.
Direct vacant available space there hit 19.1% by Q3.
What’s Driving DC Office Vacancy Higher
Remote preferences keep daily federal attendance 40 to 50% below pre-2020 levels.
Hybrid schedules cap government leased space near 60% capacity.
About 30% of DC firms remain fully remote.
Federal Footprint Shrinks Fast
Federal downsizing has reduced the workforce footprint 15% since 2019.
Consolidations are vacating about 20 million square feet.
Budget cuts, hiring freezes, and relocations outside downtown remove demand.
Landlords face backfill risk.
Recurring government shutdowns can also delay permits and inspections, adding uncertainty that further weighs on occupancy and leasing momentum.
Additional Vacancy Catalysts
Inflation and energy costs push tenants to sublease or contract.
New deliveries through 2025 outpace absorption.
Some projects are about 40% vacant.
Union agreements preserve remote options for 25% of federal staff nationwide.
Where DC Office Vacancy Is Worst (Trophy vs A/B/C)
Much of Washington, D.C.’s office vacancy is now concentrated in the market’s highest-end buildings.
Class A availability reached 19.7% in Q2 2025, or about 22.2 million square feet.
This Trophy Concentration places the most stress on prime addresses.
Class A still outperforms the broader market.
Class A trophy stress
Class A asking rents stayed near $56 per square foot in Q2 2025.
Tenant preference favors premium space, but vacancy remains elevated.
Limited new supply through 2026 may support performance.
Class B versus Class C
Class B vacancy climbed to 16.5%, about 6.4 million square feet.
This signals growing mid-tier pressure.
Combined Class B/C vacancy hovered near 13%.
Class C vacancy tightened to 3.8%, around 199,500 square feet.
This highlights Neighborhood Disparities and a smaller inventory base.
DC Leasing, Subleases, and Net Absorption Trends
While leasing activity weakened year over year through YTD Q3 2025, Washington, D.C. posted accelerating occupancy losses that intensified vacancy pressure.
Net absorption turned sharply negative in Q2 2025 at -1,010,852 SF.
Total vacancy increased as space emptied.
Leasing and Absorption Shock
By year end 2025, the District recorded -1.7 MSF of annual net absorption, including -304,154 SF in Q4.
The broader Washington metro area remained negative at -1.3 MSF, despite a 125,000 SF gain in Q4.
Sublease Overhang and Pricing Stress
Sublease availability reached about 2,947,000 SF in Q2 2025, reflecting tenant downsizing and space optimization.
This supply, alongside federal leasing slowdowns, increased Class A and B vacancy pressure and influenced sublease pricing.
CBD direct vacancy rose to 19.1% by end Q3.
DC Office Vacancy Outlook for 2026 (Base Vs Downside)
Vacancy pressure is set to collide with early stabilization signals as Washington, D.C. enters 2026 with vacancy at 22.8% in Q4 2025.
This is up 170 basis points year over year.
Supply constraints and flight-to-quality demand shape 2026.
Class A vacancy sits at 19.7%.
Base Case: Stabilization Under Supply Cuts
Under base policy scenarios, federal lease terminations are largely past by Q1 2026.
Conversions remove 600,000 square feet and deliveries stay muted.
Demand for upgraded space channels investment flows to Class A.
This supports rent improvement and vacancy easing as B and C absorption strengthens.
Downside: Rates and Hybrid Drag
Higher rates would suppress pricing and slow relocations.
Hybrid work persistence could keep D.C. vacancy elevated.
It could also tether institutional assets near the 19 percent national level.
Assessment
Washington, DC office vacancy reached a new record in 2025, reflecting persistent demand loss and limited backfill.
Leasing activity remained uneven, with subleases elevating availability and net absorption staying pressured across most classes.
Trophy assets held comparatively better, while commodity space faced deeper pricing and capital stress.
For 2026, a base case assumes slow stabilization tied to modest employment gains and conversions, while a downside case reflects refinancing shocks and further federal space reductions ahead.
