Vacancies hound Washington, DC, office market; QTS Realty buys Ariz. asset

S&P Global Market Intelligence offers our top picks of real estate news stories published throughout the week.

The office market in Washington, DC, is expected to worsen amid rising vacancies, declining valuations and increased foreclosures, The Wall Street Journal reported.

The district's office vacancy rate increased to a record high of 22.4% in the second quarter, versus less than 14% in the fourth quarter of 2019, according to the report, citing CBRE Group data.

Some 39% of securitized office loans in the US capital were either in default or at risk of default in the first quarter, data from KBRA Analytics shows.

As federal employees continue to adopt remote work, six agencies that have lease expirations between 2024 and 2027 are expected to surrender nearly 600,000 square feet of space, the Journal reported, citing Cushman & Wakefield.

CHART OF THE WEEK: US equity REIT capital offerings plunge in June

⮞ US equity real estate investment trusts collectively raised $1.44 billion in June, down 85.4% from the total capital collected in May.

⮞ The bulk of the capital in June came from debt offerings, at $1.30 billion, while preferred equity offerings accounted for the rest.

⮞ American Homes 4 Rent obtained the largest amount of capital in June, raising $500 million in a senior note offering.

Acquisitions

– QTS Realty Trust LLC purchased 206 acres of land in Avondale, Ariz., from TGV Investments LLC for $246.8 million in cash, the Phoenix Business Journal reported, citing county land records. QTS plans to develop a datacenter campus on the site.

– Nuveen LLC sold Wilshire Rodeo Plaza, a mixed-use complex in Los Angeles, to a trio of individual investors for $211 million, Commercial Observer reported. The property comprises three six-story office and retail buildings that span an entire city block.

– Empire State Realty Trust Inc. agreed to buy prime retail properties along North Sixth Street in Brooklyn, NY, for a total of $195 million, the company said in its second-quarter earnings report.

US hotel performance

US hotel performance was up year over year across all three key metrics during the week ended July 20, STR reported, citing data from CoStar, which provides information and analytics on property markets.

Revenue per available room was $122.02, up 3.4% from the comparable week in 2023. Occupancy rose by 1.0% to 73.5%, and average daily rate increased 2.4% to $165.91.

Among the top 25 markets, Houston posted the highest numbers for all three metrics. San Francisco and Seattle reported the steepest drops in revenue per available room.

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