Trophy Office Leasing Drives DC Market Amid High Vacancy

Tenant Preferences Shape DC’s Recovery

Washington, DC’s office market is mounting a selective rebound. According to Savills, second quarter leasing volume hit approximately 2M SF—the city’s highest since 2024. But the surge is tightly focused at the top: trophy assets and Class A offices are attracting nearly all significant deal activity, while older or unrenovated space continues to lag. Law firms were the biggest drivers, snapping up 600,000 SF, thanks to long-term lease commitments from major names. Despite these headline deals, overall market availability keeps climbing as tenants opt for new or modernized properties and lower quality inventory sits idle.

This bifurcation reveals a stark ‘flight to quality’ as firms reevaluate office needs post-pandemic. Even as 4M SF left the market in the past year via office-to-residential conversions, citywide availability remains elevated, underscoring how much secondary stock is being left behind. Trophy landlords are benefitting, but the rest of the downtown market continues to face an uphill battle.

The Details

Leasing activity was led by law firm White & Case, which signed for nearly 196,000 SF at 1701 Pennsylvania Avenue NW—the largest deal of the quarter. Other top legal tenants, including Steptoe, O’Melveny, and Wilkinson Barker Knauer, renewed long-term leases in trophy projects. The tech sector also contributed: Palantir expanded to 150,000 SF in Georgetown, while Thomson Reuters took almost 33,000 SF in the East End. Meanwhile, trophy and Class A spaces distinguished themselves not only by demand but also by numbers. Class A availability hovered at 10% after the quarter, versus the city’s overall rate of 24.2%. Asking rents exemplified the split: overall office rents rose a modest 2.9% year-over-year, while Class A rents jumped more than 5% to $62.29 PSF per Savills.

Demand Concentrates at the Top

The divergence between trophy/Class A and the broader office market is widening. As tenants prioritize amenities, location, and building experience, less desirable properties see little relief—even in a more active leasing environment. Federal government pullback and continued vacancy have only deepened this split. Notably, 4M SF of obsolete offices have been converted into residential use over the last year, a move that has taken marginal stock off the market but hasn’t resolved excess supply issues at the mid- and low-end. With few new projects in the pipeline, occupancy is tightening at the top but stagnating elsewhere, reinforcing an uneven recovery.

Why It Matters

DC’s office market performance illustrates the post-pandemic ‘flight to quality’ in real time. Trophy towers and renovated Class A properties are attracting blue-chip tenants. Legal and tech firms are signing long-term leases at premium rents. Savills reported a 14-point availability gap between Class A and the overall market. Class A availability stood at 10%. Citywide availability reached 24.2%. Law firms leased or renewed 600,000 SF during the quarter. Rents at top-tier buildings are holding firm. Class A asking rents reached $62.29 PSF, up more than 5% year over year. Lower-quality buildings continue to lose tenants. Many still face high vacancy. Owners are increasingly considering conversions or major renovations.

The persisting two-track recovery further complicates the investment landscape. Trophy assets seem insulated and attractive to investors as capital seeks out lower risk, higher yield opportunities. Mid-market assets, on the other hand, may see declining valuations and must consider adaptive re-use or costly updates to compete. With 4M SF already converted in the past year, redevelopment may accelerate, especially as tenants migrate up the quality curve and as new construction remains scarce.

What’s Next

Savills expects leasing momentum at the top end to carry into the back half of 2026, with major deals in the pipeline—including reported upcoming leases by Google and the US Navy. The construction pipeline remains subdued, which could put further upward pressure on trophy rents. Meanwhile, office-to-residential conversions are forecast to continue chipping away at excess stock, particularly as outdated properties struggle to draw tenants. For landlords outside the trophy and Class A bracket, expect conversion pressures, renovation needs, or continued vacancy challenges to persist as the demand gap shows no sign of narrowing.