Property Types
Office
Jul 07, 2009
By: Barbra Murray, Contributing Editor
Not a single office market has been spared from the ravages of the cruel demise of the economy, but Baltimore, unlike most other metropolitan areas, is in a position to get back on its feet right on the heels of the highly anticipated economic turnaround, according to a Cushman & Wakefield Inc. second-quarter report.
Second quarter figures show an average vacancy rate in Metropolitan Baltimore of 13.2 percent, with rates going as low as 3.3 percent in Harford County and as high as 55 percent in the BWI Airport/Howard County submarket. It's a mixed bag, of sorts. "For pockets of space of 20,000 square feet and under, it's still competitive," T. Courtenay Jenkins III, a senior director with Cushman & Wakefield, told CPN. "Rates have dropped off. It's a fist fight. But for large blocks of space, it's the opposite, so large users can't count on the same negotiating power as smaller users."
To a certain extent, however, today's numbers in Baltimore belie tomorrow's promise. Because of a certain set of circumstances that existed before the economic meltdown, Baltimore is uniquely situated to pull itself up by the bootstraps soon after the economic recovery, which Jenkins speculates will be in mid-2010. "You've got a city that leapt forward in dramatic fashion prior to the latest cycle," he explained. "Baltimore reinvented itself over the last 10 years with new developments in all sectors--residential, hotel and office/commercial. Now we have a city that is poised to take off with all the infrastructure that's been put in place once we get through the current cycle."
Baltimore, like other cities, did overdo it in the construction department before the economic downturn, but to a much smaller degree. "Yes, there's an overbuilding situation in the condo markets, but we're still undersupplied with apartments, and hotel development is still continuing based on the large conventions coming to Baltimore," said Jenkins. "On the office side, the nice thing is we don't have an overbuilt situation." Two projects predominantly leased by their namesake tenants are scheduled to deliver this year, the 580,000-square-foot Legg Mason building and the 277,000-square-foot Morgan Stanley building, both of which will carry leasing price tags in the mid- to high-30s, which is high for Baltimore. "They are leasing slowly, but the market can absorb them, so I see them pulling up rents in the long term."
The city has other advantages that will help facilitate its rebound. "With healthcare being Baltimore's engine--Johns Hopkins, and the University of Maryland Medical Center, for example, are huge drivers in our marketplace--we anticipate that having an impact on office and residential," Jenkins noted. "There are some major projects underway. Mercy Hospital is building a $400 million medical complex that will probably deliver in about 12 months, and that is going to have a lot of spin-off effect on our city." Also, there are a few shovel-ready projects that may benefit from federal stimulus funds, he added.
And there's one other factor, a major factor, that puts the Baltimore area in a premier position. "A local dynamic that no other market in the U.S. can count on is BRAC--that will certainly have an impact." As a result of the Base Realignment and Closure Act of 2005, thousands of military jobs will be relocated to bases and surrounding locations in the Baltimore area over the next several years.
"The table is set for Baltimore to continue its growth once the economy straightens out."
By: Barbra Murray, Contributing Editor
Not a single office market has been spared from the ravages of the cruel demise of the economy, but Baltimore, unlike most other metropolitan areas, is in a position to get back on its feet right on the heels of the highly anticipated economic turnaround, according to a Cushman & Wakefield Inc. second-quarter report.
Second quarter figures show an average vacancy rate in Metropolitan Baltimore of 13.2 percent, with rates going as low as 3.3 percent in Harford County and as high as 55 percent in the BWI Airport/Howard County submarket. It's a mixed bag, of sorts. "For pockets of space of 20,000 square feet and under, it's still competitive," T. Courtenay Jenkins III, a senior director with Cushman & Wakefield, told CPN. "Rates have dropped off. It's a fist fight. But for large blocks of space, it's the opposite, so large users can't count on the same negotiating power as smaller users."
To a certain extent, however, today's numbers in Baltimore belie tomorrow's promise. Because of a certain set of circumstances that existed before the economic meltdown, Baltimore is uniquely situated to pull itself up by the bootstraps soon after the economic recovery, which Jenkins speculates will be in mid-2010. "You've got a city that leapt forward in dramatic fashion prior to the latest cycle," he explained. "Baltimore reinvented itself over the last 10 years with new developments in all sectors--residential, hotel and office/commercial. Now we have a city that is poised to take off with all the infrastructure that's been put in place once we get through the current cycle."
Baltimore, like other cities, did overdo it in the construction department before the economic downturn, but to a much smaller degree. "Yes, there's an overbuilding situation in the condo markets, but we're still undersupplied with apartments, and hotel development is still continuing based on the large conventions coming to Baltimore," said Jenkins. "On the office side, the nice thing is we don't have an overbuilt situation." Two projects predominantly leased by their namesake tenants are scheduled to deliver this year, the 580,000-square-foot Legg Mason building and the 277,000-square-foot Morgan Stanley building, both of which will carry leasing price tags in the mid- to high-30s, which is high for Baltimore. "They are leasing slowly, but the market can absorb them, so I see them pulling up rents in the long term."
The city has other advantages that will help facilitate its rebound. "With healthcare being Baltimore's engine--Johns Hopkins, and the University of Maryland Medical Center, for example, are huge drivers in our marketplace--we anticipate that having an impact on office and residential," Jenkins noted. "There are some major projects underway. Mercy Hospital is building a $400 million medical complex that will probably deliver in about 12 months, and that is going to have a lot of spin-off effect on our city." Also, there are a few shovel-ready projects that may benefit from federal stimulus funds, he added.
And there's one other factor, a major factor, that puts the Baltimore area in a premier position. "A local dynamic that no other market in the U.S. can count on is BRAC--that will certainly have an impact." As a result of the Base Realignment and Closure Act of 2005, thousands of military jobs will be relocated to bases and surrounding locations in the Baltimore area over the next several years.
"The table is set for Baltimore to continue its growth once the economy straightens out."
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