Washington, D.C. earned the label as the best market to invest in office properties in 2004, according to a report conducted by Marcus & Millichap Real Estate Investment Brokerage Co. Southern California also posted a strong presence in the chart, with San Diego and Riverside-San Bernardino ranking second and third.

The company's report ranked markets based on projected supply and demand indicators such as projected office employment growth, new construction completions, rent growth, vacancy rates and the absorption of office inventory.

The nation's capital has one of the lowest expected office-vacancy rates at 11.6 percent. Another factor in its top ranking is its new construction completions, which are slated to total roughly 4 million square feet of new office space throughout 2004, almost double the amount of new office space proposed for New York City, Los Angeles and Chicago.

"[Washington, D.C.] has the best office fundamentals in the country," according to Alan Pontius, national director of Marcus & Millichap's office and industrial properties group. Pontius notes that the area's office market benefited from increased defense spending and expansion of federal agencies.

Southern California also boasts some of the lowest office vacancy rates in the country. In addition, Marcus & Millichap expect that the San Diego and Riverside-San Bernardino markets will experience the highest office rent growth next year with 2.3 percent and 2 percent, respectively. Those two markets ranked second and third on the list.

"The entire Southern California region is really the only other area of the country [besides D.C.] that continues to show a better resilience to recessionary conditions," Pontius says. "The area maintained occupancy better and diversification of the employment base has been positive."

Top 10 Office Markets Forecast for 2004
Overall Market Rank	Office- Vacancy Rate
1 Washington, D.C.	11.6%
2 San Diego	11.5%
3 Riverside-San Bernardino	10.1%
4 Orange County	14.4%
5 Los Angeles	14.0%
6 Las Vegas	15.7%
7 New York City	10.9%
8 Tucson	13.4%
9 Tampa	14.9%
10 Sacramento	2.6%
Source: Marcus & Millichap Note: Office vacancy rate is only one of the criteria used by Marcus & Millichap in its rankings.