Wall Street Journal reports on a softening of DC's commercial real estate market

While still stronger than other markets across the country, and this carries over to the residential market, a decline in federal agency leasing means that developers are slackening their expectations of continued growth. See "Washington's Office Market Dials Back."

From the article:

About three million square feet of government leases that were in the pipeline—involving such agencies as the Department of Homeland Security and the Federal Bureau of Investigation—have been delayed or canceled, said Scott Homa, an executive vice president for research at Jones Lang LaSalle.

"We're seeing literally no new government expansion," he said.

The change is causing landlords to dial back their bullish expectations, which have for years been fueled by ever-expanding public spending that keeps offices filled with agencies and government contractors.

Now owners are adjusting to the likelihood that the public sector and its sprawling support system in the private sector will halt its growth in coming years—or even shrink.

"For us, it'll mean a relatively flat market, which we're not used to," said Douglas Donatelli, chief executive of First Potomac Realty Trust, a large office landlord in the region. "We're used to a market that absorbs space."