Political dramas may dominate the headlines in Washington D.C., but the market's allure for office investors is far more mundane — stable cash flow. The metro area touts an impressive vacancy rate and effective rents that have held up under the strain of the economic recession.

At the end of the first quarter, the vacancy rate in Washington D.C. declined 30 basis points to reach 10.4%, well below the national average of 17.3%, according to Reis, a New York-based real estate research firm. At the same time, effective rents have dropped about 5% from their 2009 peak and are currently pegged at $41.43 per sq. ft.

“There is a tremendous amount of domestic capital looking to invest in D.C. for obvious reasons,” says John Kevill, a managing director for Jones Lang LaSalle in Washington, D.C.

Aside from its solid fundamentals, investor demand is stoked by the area's dominant industry, the federal government. The office market is benefiting from continued government spending in areas such as health care, the war on terror and the economic stimulus package. “That activity is really differentiating our economy from virtually every other economy in the country, which is why we're seeing an increase in transactional velocity,” says Kevill.

JLL currently lists twice the number of for-sale properties compared with a year ago. The real estate services firm recently represented America's Capital Partners in the $43.5 million sale of a suburban office building in Landover, Md.

A key selling point for the building at 3300 75th Ave. was a long-term lease. The building is 100% occupied by the Department of Defense with a new 10-year lease signed by the General Services Administration (GSA). “That building is a good example of what buyers want in today's market — stabilized properties with stabilized income streams,” says Kevill. Government Properties Income Trust, the buyer, closed the sale in March.

The Class-B building sold for a capitalization rate — the initial return to the buyer based on purchase price — of 8.4%. According to Real Capital Analytics (RCA), cap rates for suburban Maryland office properties have averaged 9.4% over the past 12 months.

“Because the property has strategic importance for the [Department of Defense], the buyer was willing to make a bet that the tenant would be there for the long term,” Kevill says.

Investors are stepping up to buy stable properties. The Washington D.C. metro area reported $2.28 billion in office sales in the 12 months ending March 31, RCA reports. That may seem paltry compared with the $15.46 billion in transactions that occurred in 2007, but it represents a hefty slice of the $16.79 billion in total U.S. office sales that closed in the past 12 months, according to RCA. The research firm tracks deals valued over $5 million.

More debt financing is available to buyers now, says Jim Meisel, a senior managing director at Holliday Fenoglio Fowler in Washington, D.C. HFF just brokered the $245 million sale of Washington Harbour, a mixed-use luxury condo and office complex in Georgetown, at a cap rate of 6.2%.

“We also are starting to see more properties sell where everything isn't perfect,” he adds. “Those properties tend to be located in the core and inner-ring suburbs, but we take that as a very positive sign.”