D.C. Office Market Grapples With Zombie Buildings Unable to Sign Leases

Stalled office buildings, often called "zombie" properties, are distorting leasing activity in Washington, D.C. Owners of these buildings lack the capital for brokerage commissions, tenant improvement allowances, concessions or the renovations today's tenants expect, so they cannot close new deals.

CBRE tracks 30 blocks of 50,000 SF or more in the District where owners cannot transact this year. Together they hold about 5.5M SF, a substantial share of the city's roughly 125M SF office inventory, and the figure has barely moved from last year. Smaller blocks are not included in that count.

Speakers at Bisnow's DMV Office Summit, including Garfield Investments' John Mason and Monument Realty's Michael Darby, said the situation makes it hard for tenants and brokers to tell which landlords can actually sign. Darby prefers the term "imposter" buildings, arguing they create a false sense of available options. Savills' Jon Glass called for more transparency about ownership, lender approval and deal parameters.

The stalled supply has a flip side. Less competing space supports higher rents for landlords who can transact, and investors may find discounted buildings that could be upgraded. Class-A rents rose 6.2% year over year in the third quarter, to about $80 per SF on average.

For developers and lenders, the practical takeaway is that verifying a landlord's ability to fund leasing costs is now a core part of underwriting D.C. office deals.