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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For quarterly period ended September 30, 2011

OR

COMMISSION FILE NO. 1-6622

WASHINGTON REAL ESTATE

INVESTMENT TRUST

(Exact name of registrant as specified in its charter)

6110 EXECUTIVE BOULEVARD, SUITE 800, ROCKVILLE, MARYLAND 20852

(Address of principal executive office) (Zip code)

Registrant’s telephone number, including area code: (301) 984-9400

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety (90) days.    YES  x    NO  ¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES  ¨    NO  x

As of November 2, 2011, 66,069,443 common shares were outstanding.

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WASHINGTON REAL ESTATE INVESTMENT TRUST

INDEX

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PART I

FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

The information furnished in the accompanying unaudited Consolidated Balance Sheets, Condensed Consolidated Statements of Income, Statement of Changes in Shareholders’ Equity and Statements of Cash Flows reflects all adjustments, consisting of normal recurring items, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The accompanying financial statements and notes thereto should be read in conjunction with the financial statements and notes for the three years ended December 31, 2010 included in WRIT’s 2010 Annual Report on Form 10-K.

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WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

See accompanying notes to the financial statements.

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WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

See accompanying notes to the financial statements.

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WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(IN THOUSANDS)

(UNAUDITED)

See accompanying notes to the financial statements.

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WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)

See accompanying notes to the financial statements.

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WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011

(UNAUDITED)

NOTE 1: NATURE OF BUSINESS

Washington Real Estate Investment Trust (“We” or “WRIT”), a Maryland real estate investment trust, is a self-administered, self-managed equity real estate investment trust, successor to a trust organized in 1960. Our business consists of the ownership and development of income-producing real estate properties in the greater Washington metro region. We own a diversified portfolio of office buildings, medical office buildings, industrial/flex centers, multifamily buildings and retail centers.

Federal Income Taxes

We believe that we qualify as a real estate investment trust (“REIT”) under Sections 856-860 of the Internal Revenue Code and intend to continue to qualify as such. To maintain our status as a REIT, we are required to distribute 90% of our ordinary taxable income to our shareholders. When selling properties, we have the option of (a) reinvesting the sales proceeds of properties sold, allowing for a deferral of income taxes on the sale, (b) paying out capital gains to the shareholders with no tax to WRIT or (c) treating the capital gains as having been distributed to the shareholders, paying the tax on the gain deemed distributed and allocating the tax paid as a credit to the shareholders.

Generally, and subject to our ongoing qualification as a REIT, no provisions for income taxes are necessary except for taxes on undistributed REIT taxable income and taxes on the income generated by our taxable REIT subsidiaries (“TRS’s”). Our TRS’s are subject to corporate federal and state income tax on their taxable income at regular statutory rates.

On August 5, 2011, we entered into five separate purchase and sale agreements to effectuate the sale of our entire industrial segment and two office assets for an aggregate purchase price of $350.0 million. On September 2, 2011, we closed the first three of the purchase and sale agreements, for an aggregate $235.8 million. We closed on the remaining two purchase and sale agreements subsequent to the end of the quarter. We recognized a $56.6 million gain on sale of real estate during the third quarter of 2011 in connection with the first three purchase and sale agreements. A portion of the capital gains from the sales were reinvested in replacement properties, with the remainder to be paid out to the shareholders.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Significant Accounting Policies

We have prepared our consolidated financial statements using the accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2010.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements include the consolidated accounts of WRIT, its majority-owned subsidiaries and entities in which WRIT has a controlling interest, including where WRIT has been determined to be a primary beneficiary of a variable interest entity (“VIE”). All intercompany balances and transactions have been eliminated in consolidation.

We have prepared the accompanying unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information presented not misleading. In addition, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for the periods presented have been included. These unaudited financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2010.

Within these notes to the financial statements, we refer to the three months ended September 30, 2011 and September 30, 2010 as the “2011 Quarter” and the “2010 Quarter”, respectively, and the nine months ended September 30, 2011 and September 30, 2010 as the “2011 Period” and “2010 Period”, respectively.

Use of Estimates in the Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation due to the reclassification of certain properties as discontinued operations (see note 3 to the consolidated financial statements).

NOTE 3: REAL ESTATE ACQUISITIONS AND DISCONTINUED OPERATIONS

Acquisitions

WRIT acquired the following properties and land for development during the 2011 Period:

The results of operations from the acquired operating properties are included in the consolidated statements of income as of their acquisition dates.

The revenue and earnings of our 2011 acquisitions are as follows (amounts in thousands):

We have recorded the total purchase price of the above acquisitions as follows (in millions):

The weighted remaining average life in months for the components above, other than land and building, are 65 months for tenant origination costs, 54 months for leasing commissions/absorption costs, 68 months for net lease intangible assets and 65 months for net lease intangible liabilities.

The difference in total contract purchase price of $371.6 million and the acquisition cost per the consolidated statements of cash flows of $281.7 million is primarily related to the two mortgage notes assumed for $76.7 million relating to John Marshall II and Olney Village Center, cash paid for the acquisition of land at 650 North Glebe Road for $11.8 million included in development, and credits received at settlement totaling $1.3 million.

The following unaudited pro forma combined condensed statements of operations present the consolidated results of operations for the 2011 Quarter and Period and the 2010 Quarter and Period, as if the above described acquisitions had occurred at the beginning of the year prior to the acquisition. The unaudited pro forma information does not purport to be indicative of the results that actually would have occurred if the acquisitions had been in effect for the Quarters and Periods presented. The unaudited data presented is in thousands, except per share data.

Noncontrolling Interests in Subsidiaries

We entered into an operating partnership agreement with a member of the entity that previously owned Northern Virginia Industrial Park II in conjunction with the acquisition of this property in May 1998. We account for this activity by applying the noncontrolling owner’s percentage ownership interest to the net income of the property and reporting such amount in our net income attributable to noncontrolling interests. Subsequent to the end of the 2011 Quarter, we closed on the sale of Northern Virginia Industrial Park II (see next section), thereby terminating this noncontrolling interest in our earnings. Accordingly, the total amounts reported on the consolidated statements of income for noncontrolling interests are related to discontinued operations.

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Discontinued Operations

We dispose of assets (sometimes using tax-deferred exchanges) that no longer meet our long-term strategy or return objectives and where market conditions for sale are favorable. The proceeds from the sales may be reinvested into other properties, used to fund development operations or to support other corporate needs, or distributed to our shareholders. Properties are considered held for sale when they meet the criteria specified by GAAP. Depreciation on these properties is discontinued at that time, but operating revenues, other operating expenses and interest continue to be recognized until the date of sale.

On August 5, 2011 we entered into five separate purchase and sale agreements to effectuate the sale of our entire industrial segment and two office assets (the Crescent and Albemarle Point) for an aggregate purchase price of $350.0 million. On September 2, 2011, we closed the first three of the purchase and sale agreements, for an aggregate $235.8 million. We closed on the remaining two purchase and sale agreements subsequent to the end of the quarter. We recognized a $56.6 million gain on sale of real estate during the 2011 Quarter in connection with the first three purchase and sale agreements.

The impact of the disposal of our industrial segment on revenues and net income is summarized as follows (amounts in thousands, except per share data):

We sold or classified as held for sale the following properties during the 2011 Period and 2010:

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Operating results of the properties classified as discontinued operations are summarized as follows (in thousands):

Operating income (loss) by each property classified as discontinued operations is summarized below (in thousands):

The operating loss for Dulles Station I for the 2011 Period includes a $0.6 million impairment charge to reflect the property’s fair value less any selling costs based on its contract sales price.

NOTE 4: MORTAGE NOTES PAYABLE

On August 30, 2011, we assumed a $22.6 million mortgage note as partial consideration for the acquisition of Olney Village Center. This mortgage note bears interest at 6.37% per annum. The fair value interest rate on this mortgage note is 4.94%, based on quotes obtained for similar loans. We recorded the mortgage at its fair value of $24.4 million. Principal and interest are payable monthly until November 1, 2023, at which time all unpaid principal and interest are payable in full.

On September 15, 2011, we assumed a $54.1 million mortgage note as partial consideration for the acquisition of John Marshall II. This mortgage note bears interest at 5.79% per annum, which approximates its fair value interest rate, based on quotes obtained for similar loans. Principal and interest are payable monthly until May 6, 2016, at which time all unpaid principal and interest are payable in full.

On September 1, 2011, we repaid without penalty the remaining $9.1 million of principal on the mortgage note secured by Shady Grove Medical Village II.

Subsequent to the end of 2011 Quarter, on October 5, 2011, we entered into an amendment to the purchase and sale agreement for 6100 Columbia Park Road and Dulles Business Park , under which we agreed to seek prepayment of the mortgage notes secured by Dulles Business Park prior to closing the sale. Under the terms of the amendment, if we prepaid the mortgage notes prior to November 1, 2011, then the sales price would be increased by $875,000 in order to partially offset the penalties incurred by us for the prepayment of the mortgage notes. On October 7, 2011, we prepaid the remaining $17.9 million of principal on the mortgage notes, incurring prepayment penalties of approximately $1.0 million. Because Dulles Business Park is considered held for sale as of September 30, 2011 (see note 3 to the consolidated financial statements), these mortgage notes are included in “Other liabilities related to properties sold or held for sale” on the consolidated balance sheets.

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NOTE 5: UNSECURED LINES OF CREDIT PAYABLE

As of September 30, 2011, we maintained a $75.0 million unsecured line of credit (“Credit Facility No. 1”) maturing in June 2012 and a $400.0 million unsecured line of credit (“Credit Facility No. 2”) maturing in July 2014.

The amounts of these lines of credit unused and available at September 30, 2011 are as follows (in millions):

We executed borrowings and repayments on the unsecured lines of credit during the 2011 Quarter as follows (in millions):

We made borrowings during the 2011 Quarter to partially fund the acquisitions of Olney Village Center and John Marshall II, to pay off the Shady Grove Medical Center mortgage note and for general corporate purposes. We made a repayment during the 2011 Quarter using proceeds from the first phase of the sale of the Industrial Portfolio.

NOTE 6: NOTES PAYABLE

We repaid the remaining $2.7 million of our 3.875% convertible notes without penalty in September 2011 using proceeds from the sale of the Industrial Portfolio.

NOTE 7: DERIVATIVE INSTRUMENTS

In May 2009, we entered into a forward interest rate swap with a notional amount of $100.0 million that qualifies as a cash flow hedge. We enter into interest rate swaps to manage our exposure to variable rate interest risk. We do not purchase derivatives for speculation. We record our cash flow hedges at fair value in accordance with GAAP, based on various discounted cash flow methodologies and observable inputs. We record the effective portion of changes in fair value of cash flow hedges in other comprehensive income. This change in fair value of cash flow hedges is the only activity in other comprehensive income (loss) during the periods presented in our consolidated financial statements. We record the ineffective portion of changes in fair value of cash flow hedges in earnings in the period affected. We assess the effectiveness of our cash flow hedges both at inception and on an ongoing basis. We deemed the hedges to be effective for the 2011 and 2010 Quarters and Periods, as applicable.

The fair value and balance sheet locations of the interest rate swaps as of September 30, 2011 and December 31, 2010 are as follows (in millions):

The interest rate swap has been effective since inception. The gain or loss on the effective swaps is recognized in other comprehensive income, as follows (in millions):