Government spending has declined in three of the past four years, including the last two - it's the first time spending has dropped for two straight years since the 1953-55 fall-off following the Korean War. Recent deals between Congress and the President, however, put the government back on track for growth.
While D.C. office rents are expected to dip 3% this year - making it the weakest big market in the country - a rebound should come starting next year, says MLV, making now a good time to buy underperforming Beltway office REITs.
Washington Real Estate Investment Trust (WRE +1.3%), First Potomac Realty Trust (FPO +0.9%), and Brandywine Realty Trust (BDN +1.3%) all yield 4-5% and sell at 14-25% discounts to NAV, says MLV. The purest D.C. office play is WRE with 100% exposure to the nation's capital. FPO is 77% exposed, and Brandywine 24%. All underperformed not just the S&P 500 over the past year, but the Vanguard REIT ETF (VNQ +0.4%).