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From The Ground Up

Vacancies Decline Across Region

Rental Rates Rise as Companies Lease More Space for Growing Workforces

By Dana Hedgpeth
Washington Post Staff Writer
Monday, December 27, 2004; Page E03

In the past year and a half, Paul J. Argy leased an additional 8,000 square feet of space for his accounting firm in McLean. He needed the extra space for the 40 employees he hired to keep up with his firm's 35 percent growth.

"The new clients are coming in because the national firms are tied up with Sarbanes-Oxley; they are over capacity, so we're picking up a lot of clients," said Argy, who is president of Argy, Wiltse & Robinson P.C., which has 130 employees in a 30,000-square-foot office at the Greensboro Corporate Center.

Small, service-related firms are moving to Silver Spring, which is home to Discovery Communications Inc. (James M. Thresher -- The Washington Post)

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It is job growth like this that has helped fuel the 11 million square feet of office space that tenants have leased this year through Dec. 1, more than three times the amount of space that was leased in 2003, according to Delta Associates, an Alexandria real estate research firm.

In the Washington region, the vacancy rate dropped to 9.2 percent by Dec. 1 from 11.2 percent the same time a year earlier. Washington's vacancy rate was less than the national vacancy rate of 13.2 percent and less than New York's 10.3 percent, Delta's research showed.

The District, which has little room for new buildings, had a vacancy rate of 6 percent, compared with 7.1 percent a year earlier. Government agencies, associations and law firms drove the demand for office space.

Maryland's biotech industry and the National Institutes of Health in Bethesda gobbled up office space more slowly than in the past, some brokers said. New demand from smaller companies in Silver Spring and Greenbelt, for example, kept vacancy rates in suburban Maryland from rising. Its vacancy rate was 10.1 percent, down from 11.7 percent a year earlier.

In Northern Virginia, where the technology bust left many empty buildings, vacancy rates were still the highest in the region. But the expansion of government agencies and their related contractors helped bring the vacancy rate down to 11.1 percent from 13.9 percent in 2003.

"We've had greater-than-expected job growth this year in the region, so companies are taking space and that's made it a heck of a year," said Greg Leisch, chief executive of Delta Associates.

The average sales price was $364 per square foot in the District, compared with $323 per square foot the year before, said Cassidy & Pinkard, which is one of the largest sales investment companies in the region.

The highest price paid for a building, at 1001 Pennsylvania Ave. NW, was $461 million. The building was bought by the Teachers Insurance & Annuity Association, College Retirement Equities Fund of New York.

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