Washington DC Office Market Report – Third Quarter 2019

ECONOMIC OVERVIEW

The Washington D.C. metropolitan economy continued to expand but the pace of job
growth moderated going into the second-half of 2019. Employers across the metro area
expanded their payrolls by 33,600 net new jobs during the prior 12 months (ending
August 2019), representing an annual 1.0% growth rate. The Leisure & Hospitality sector
outperformed all industry sectors with 15,600 new jobs added over the prior 12 months,
accounting for 46% of the area’s job growth. The Professional & Business Services and
Education & Health Services industry sectors also contributed to the annual gains with
9,400 and 8,900 new jobs created, respectively. As a result, the region’s unemployment
rate has contracted by 20 basis points to 3.2%, outperforming the national rate of 3.5%.
The regional economy is largely driven by the federal government but continues to
experience the diversification of industry with a growing private sector. The Professional
& Business Services sector typically leads in job growth, but the Leisure & Hospitality
sector has witnessed the strongest job gains with an impressive 4.5% annual growth
rate, outpacing all industry sectors as a result of the area’s popular tourism and
convention destination.

The Washington D.C. economy remains firmly in expansion mode, but employment gains
have decelerated to their slowest pace since 2014. Although the economy continues
to grow at a modest pace, there are widespread concerns about the possible negative
impact of trade-related uncertainty and a slowing global economy. However, a possible
congressional ratification of the USMCA, a potential trade deal with China, and the
Federal Reserve’s likely interest rate cut could give the economy a boost. On the other
hand, the continued trade tensions as well as gridlock in Congress with the upcoming
2020 election could derail the longest economic expansion on record. Looking ahead,
the D.C. metro area is forecasted to create an average of 28,800 jobs from 2019 to
2021, according to the Center for Regional Analysis at George Mason University.

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