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Map: Office Submarkets

Quarter Highlights
  • Construction at St. John Properties Inc.'s newest project, Annapolis Commons has commenced. The first phase of the 28-acre mixed-use project will include a two-story 63,000 sf building and a one-story 32,000 sf building, both expected to deliver in early 2014. The company also plans to build three additional buildings; a single-story Class A building and two two-story buildings for a total of 227,000 sf of office space.
  • MacKenzie has added a 120,000 sf, single story, Class B building at 1750 Forest Drive and a 5,276 sf, two-story Class B building at 44 West Street to tracking this quarter. The addition added a total of 36,000 sf of availability to the market.
  • In an effort to reduce costs, Mercy Medical Center plans to pull out of two leased offices this year saving an anticipated $1.3 million in leasing expenses. The medical center currently leases 25,600 sf at Tide Point and 30,000 sf at 225 North Calvert Street.
  • Mill No. 1, a redevelopment project along the Jones Falls Parkway, has signed its first tenant - Evergreen Health Cooperative LLC. A private health insurance co-op has leased 7,400 sf at the former Mount Vernon Mill located at 3000 Falls Road in Baltimore. The mixed use property consists of three buildings totaling 50,000 sf of office space and will feature two restaurants, a garage and 84 apartments.
  • Construction at the University of Maryland School of Medicine’s new $200 million proton treatment center on West Baltimore Street has been topped off. The 122,000 sf project is part of the University of Maryland BioPark located in Baltimore’s west side.
  • Local developer, Caves Valley Partners has purchased the land between West Susquehanna Avenue, Washington Avenue, and West Chesapeake Avenue in Towson. The group has recently redeveloped Towson City Center and 1111 Light Street Downtown.
  • One of the first buildings to deliver at the long awaited Metro Centre in Owings Mills is the Baltimore County Library. Several retail spaces and apartments are on track to follow shortly in the second quarter, while nearly 200,000 sf of office space is expected to deliver in summer 2013. As Baltimore County's first transitoriented development, the project calls for 1,200,000 sf of office space, 300,000 sf of shops and restaurants, 1,700 units of housing and a 250-room hotel.
  • VIPS parent company General Dynamics will assume the remaining space in the office tower at 1 W. Pennsylvania Avenue taking the 349,826 sf Class A building to nearly 78 percent occupancy.
Market Outlook

By Anirban Basu, Sage Policy Group

Office Market Recovery Remains Remarkably Gradual

Baltimore’s regional office market continues to recover, but forward momentum has been virtually imperceptible. During the first quarter of 2013, the regional office market absorbed 111,200 square feet and vacancy with sublet declined from 16.0 percent to 15.8 percent.

Much of the absorption continues to be in the southern portion of the metropolitan area, which includes the Columbia (+127,900) and Annapolis (+35,100) submarkets. Note that if one excludes the Columbia sub-market, Baltimore’s regional net absorption during the year’s initial quarter was actually negative.

Interestingly, the BWI submarket experienced negative net absorption (-63,300) during the year’s first quarter. That market is rich in defense contractors and until very recently had been one of the Baltimore area’s most reliable performers. The extent to which government contractors or sequestration explains recent market performance is unclear. During last year’s final quarter, the BWI submarket absorbed nearly 100,000 square feet. Vacancy with sublet in the southern metropolitan area now stands at 13.6 percent.

The northern metropolitan area, which includes submarkets like Towson, Harford County and the Reisterstown Road Corridor experienced negative net absorption (-45,100) during 2013’s first quarter. Viewed from a glass half-full perspective, this actually represents improvement. During 2012’s final quarter, negative net absorption in this part of the regional market was (-100,500) square feet. Vacancy with sublet in the northern metropolitan area stood at 16.2 percent during the first quarter, up from 14.4 percent one year ago.

Performance in Baltimore City remains mixed. In City Center, net absorption totaled 88,900 square feet during the first quarter. That helped bring downtown’s vacancy with sublet down to 20.3 percent from 20.6 percent in the prior quarter and 22.6 percent one year ago. However, in the balance of the city, quarterly net absorption was negative (-31,600) and vacancy with sublet is up to 14.6 percent from 14.2 percent during the prior quarter and 13.7 percent one year ago.

Though the national economy has largely outperformed expectations thus far in 2013, there is no guarantee that the Baltimore market will continue to recover, even gradually. The impact of sequestration has been delayed by a number of forces. The initial start date for the sequester had been January 1st. That was subsequently postponed until March 1st. Many agencies appear to have then waited to initiate mandated spending reductions in anticipation of another continuing resolution. More recently, agency heads have been working to understand how much operational flexibility is embodied in the most recent continuing budget resolution. The implication of all of this is that the impact of spending reductions will largely be concentrated during spring and summer months and this may result in material slowing of regional economic growth, job creation, the pace of deal-making and net absorption.

Notable Transactions
Lease

Location Submarket Tenant Amount Leased SF
410 Natinoal Business Pky BWI Confidential 57,670 sf
7120 Samuel Morse Drive Columbia MedAssurant, Inc. 33,371 (r)
6190 Guardian Gateway Harford County Adams Communication & Engineering Technology 26,500 sf
3700-B O'Donnell Street Baltimore City Southeast Bravo Health 25,017 sf
400 Redland Court Reisterstown Rd Corridor Confidential 24,821 sf
401 E. Pratt Street City Center Confidential 11,300 sf

Sale

Location Submarket Price PSF Building Size SF
(2) Class A Office Buildings I-83 Corridor $23,700,000 $145.72 162,646 sf
6625 Selnick Drive Columbia $2,317,840 $76.69 30,233 sf
6940 Tudsbury Road Baltimore County West $2,300,000 $142.80 16,107 sf
Multi-Condo Units Columbia $1,146,270 $190.00 6,033 sf

(r) Renewal


* All information furnished regarding property for sale, rent, exchange or financing is from sources deemed reliable. No representation is made as to the accuracy thereof and all such information is submitted subject to errors, omissions, or changes in conditions, prior sale, lease or withdrawal without notice. All information should be verified to the satisfaction of the person relying thereon. Portions of the base statistics are from CoStar Property data. Data as of 3/2013.