Washington area office space, particularly in prime downtown locations, is becoming increasingly expensive. And the annual leasing cost for new space, which now ranges up to $14 a square foot, even seems to be encouraging tenants to lease now for future needs.
Currently available office space is 99 percent leased at rates that have increased 10 percent or more in the past year. Leasing specialists privately concede that some developers are asking and getting exceptionally high rates. Most leases now include escalator clauses for spaces that will not be available until 1979 or 1980.
A recent report from Julien J. Studley Inc., a leasing firm with offices here and in othef major cities, showed that 1.3 million square feet of office space was leased in the District in July and August. The previous high was 853,000 square feet during June and July 1972, when much of the space was leased to the federal government. In March and April 1977, when the office leasing market began to turn red hot in this area, Studley records show 616.000 square feet signed.
Craig Lemle, who supervises Studley's Washington report, said that total leasing this year exceeds 2 million square feet in D.C., more than double the amount leased at this point in 1977. He added that there is no particular explanation for the heavy lease signings in July and August, which often are dull months in that market. But he said that less than 5 percent of the new space went to government.
Another leasing specialist commented that the high total for July and August likely is just an accident, that long-negotiated leases just "happened to be signed" in those months this year.
Connecticut Avenue at L and K Streets NW is still the heart of the most sought downtown area, particularly for law firms. Many attorneys are moving into larger spaces or setting up Washington offices for the first time. "They are willing to pay top dollar for prestige and they like long-term (often 10 years) leases," one specialist said.
Specialist C. Duke Brannock commented that many law firms and other big users of office space are taking "more space than they really need now" to be assured of room to expand. That means that some smaller blocks of space are available for short-term subleasing, as the renters of big blocks of space make deals that they think will be favorable in future years if the inflation spiral continues.
But Brannock, Simon and Thomas Owens (of Shannon and Luchs Co.) agree that tenants are accepting escalator clauses geared to expected higher utility and operating costs, and also are paying more for partitioning and special services. "There are no goodies - such as a month's free rent for early signing or free partitioning - being offered today," Brannock said.
In addition to law firms, trade associations and accounting firms are major leasers of office space.