Official Release, Cassidy Turley Commercial Real Estate Services:
The Baltimore Metropolitan office market continued to experience consistent demand and activity as it approached the midyear point with more than 450,000 square feet of total positive absorption in the second quarter. The overall vacancy rate dropped from 19.54% to 18.46%. Demand for Class A and Class B office product was fairly evenly distributed across the entire market with more than 200,000 square feet of positive absorption in each product class.
The Northern Baltimore-Washington Corridor experienced the heaviest volume of demand and leasing activity in the second quarter with almost 325,000 square feet of positive absorption. This demand, as well as additional deals scheduled to close in the second half of the year, marks the highest period of demand in the Corridor since the pre-recession BRAC announcement. Recently delivered projects continue to attract new tenants and defense contractors continue to drive demand in the market.
The Downtown submarket had nearly 100,000 square feet of net new leasing marking the second straight quarter of positive growth. While the absorption is undoubtedly a positive development within the Downtown submarket, it is important to note that this activity has been limited to a select few buildings and is largely the result of transactions that were completed in the second half of 2011 or early 2012. More recently, the Downtown submarket has seen a decline in prospect activity compared to the Northern Baltimore-Washington Corridor.
The Suburban North submarket experienced negative absorption of 64,900 square feet. This was the result of several large blocks of space being vacated. Big Huge Games is vacating almost 19,000 square feet at 1954 Greenspring Drive and Lafarge and Bally Total Fitness combined to vacate nearly 34,000 square feet at 300 East Joppa Road. The good news is Schilling Green II and Towson City Center, two development projects expected to deliver by year-end, are both almost fully pre-leased. Totaling more than 280,000 square feet, these Class A buildings demonstrate the continued demand for superior quality office product in the Suburban North submarket.
The Capital Market in Baltimore remains strong. Pent-up demand from mid-2011 has led to an inflow of investment money in the first half of 2012. Investor confidence remains high despite uncertainty surrounding the European debt crisis and the upcoming Federal election. The Baltimore Metropolitan area has seen investment volume of over $450 million, an encouraging sign after a strong 2011.
Forecast
• Downtown demand is expected to slow, suggesting that future positive absorption will be limited.
• The Northern Baltimore-Washington Corridor will continue to experience consistent demand but tenants may take a more cautious approach to leasing new and expanded space due to uncertainty surrounding the Presidential election and future federal budget cuts.
• Suburban North and Harford County will continue to see moderate demand with the majority of the leasing activity in the I-83 North and Aberdeen submarkets.
