Fannie Mae to Vacate Its DC Headquarters

The federal government has been a primary culprit in the cratering of the office market in Washington DC. The Feds are the city’s largest employer, with a huge portfolio of DC office space that the government owns and leases, but a large portion of that space isn’t being used.

According to a recent report from the Government Accountability Office, only a quarter of the federal headquarters space in DC is being occupied on a regular basis at a time when the office vacancy rate in the city stands at a record 21.2%.

Now comes news that the federally sponsored Federal National Mortgage Association, better known as mortgage giant Fannie Mae, has decided to opt out of a 15-year lease for its 720K SF headquarters at DC’s Midtown Center.

The lease doesn’t expire until 2029, but Fannie Mae has invoked an early-out clause and landlord Carr Properties has listed the space as available for lease, according to CoStar data.

A Fannie Mae spokesperson told GlobeSt.com that the mortgage giant is “embracing” flexible work but will continue to maintain a footprint in Washington DC.

“Like many other companies, we are continuing to embrace our flexible work environment by exploring office space options that support our workforce while being fiscally responsible,” the Fannie Mae spokesperson said. “Per our Charter, we will continue to maintain a presence in the Washington, DC metropolitan area.”

The Midtown Center was developed on the site of the former Washington Post headquarters at 1100 15th Street NW. Two Midtown Center towers are connected by three elevated walkways above a public courtyard with 44K SF of retail and restaurants.

Fannie Mae inked a 15-year, $770M deal in 2015 for more than 300K SF in Midtown Center’s east tower and 414K SF in the west tower, one of the largest office deals of the decade.

The remaining space at the Midtown Center’s complex was leased to WeWork in 2019 and remains an active lease. WeWork, now in Chapter 11, reportedly is negotiating lease terms with Carr.

The DC office market recorded 52K of negative net absorption in the fourth quarter. In total, the marketed posted 1M SF of occupancy loss in 2023, driven by vacant sublease space and large consolidations, according to CBRE’s Q4 2023 market report.

CBRE noted a decline in large transactions (24 in 2023 compared to 45 on average pre-pandemic), which it said had a significant impact on market fundamentals.

“Despite rightsizing efforts and varying return-to-office policies across agencies, the federal government remains the largest user of office space in the District and leased more space than any other industry in 2023,” CBRE said.

Despite urging by the Biden administration and Congress to end pandemic-era telework policies, federal agencies have yet to reach their return-to-office objectives, the Real Estate Roundtable reported last month. Only about half of cabinet agencies have achieved the goal of workplace return by January 2024, the report said.