Suburban Maryland’s office demand continued to soften during the fourth quarter of 2020 with -153,912 square feet of quarterly absorption, bringing 2020 annual net absorption to -1.1 million square feet. As a continued result of disruption related to COVID-19, market activity was modest, with limited leasing activity and few notable tenant moves. The overall vacancy rate registered 14.7% at the end of the fourth quarter, a decrease of 10 basis points from the previous quarter but an increase of 110 basis points from a year ago. Asking rental rates ended the 2020 at $28.97/SF, an increase of 3.7% from $27.94/SF in the fourth quarter of 2019. While it may seem counterintuitive that asking rents continued to increase despite negative demand for space, market forces often take a while to adjust, and it is likely effective rents will decline over the next year as owners increase concessions to lure tenants in an environment of tepid demand. Additionally, the construction pipeline includes high-quality space with asking rates that match the quality of product, which boosts the average asking rent.

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