Venture capital investments a bright spot for D.C. commercial real estate market

Technology-related companies and startup firms in the greater Washington, D.C., metro area have attracted more than $943 million in venture capital investment through the third quarter of this year, making the sector one of the region's bright spots, according to research from Jones Lang LaSalle (JLL).

Companies receiving venture capital and firms graduating from incubator/accelerator/coworking spaces like 1776 and WeWork are opening “decent-sized” offices of their own, according to Andy O'Brien, senior vice president in the D.C. office of JLL, a professional services and investment management firm that offers real estate services.

“Once tenants get series A or angel funding, one of their first orders of business is to graduate from co-working offices and find space where they can grow,” O'Brien said in a statement.  “Most of these startups are looking for open office plans where everybody can work together.”

Office space in Washington, D.C., typically reflects the build-out preferred by lobbyists or law firms, so companies are vying for creative-type spaces. Well-located, funky, urban buildings are attracting a premium rental rate for their features, which may include 12-foot ceilings and exposed brick.

“Cool spaces are at a premium,” O'Brien says. “And for every company graduating from incubator or accelerator co-working space, there are 100 behind them.”

Year to date, Northern Virginia has drawn more than $336.2 million in venture capital funding, with major investments relating to software development.  Reston and the Rosslyn-Ballston corridor are the hottest submarkets for the funding. Evolent Health, a health technology company in Arlington that provides innovative payment systems, and Clarabridge, which has an office in Reston, attracted $100 million and $80 million investments, respectively. These rank as two of the country's top 10 largest deals of the third quarter.

Washington, D.C, topped $200 million in venture capital with more than half of that directed toward companies that occupy office space in the East End.

Meanwhile, suburban Maryland was the busiest market with $406 million in venture capital. Three quarters of that money went into Bethesda and the I-270 corridor, with biotechnology companies like Precision for Medicine one of the area’s primary drivers.