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Map: Office Submarkets

Quarter Highlights
  • A five building portfolio in White Marsh, Maryland was purchased early in the quarter by New England Institutional Investor Greenfield Partners. The group purchased the 162,000 sf portfolio comprised of 8601-8615 Ridgely's Choice Drive, 8114 Sandpiper Circle, 7923 Honeygo Boulevard, 7939 Honeygo Boulevard, and 8133 Perry Hall Boulevard, for $19,200,000 or about $118.06 psf. The buildings were approximately 85 percent leased at the time of sale. The firm also purchased a Columbia portfolio comprised of three office parks for $80,750,000. The 20 building portfolio, a mix of office and single-story flex buildings, was approximately 93 percent leased at the time of sale.
  • 185 Admiral Cochrane Drive welcomed the United States Navy into approximately 70,000 square feet (sf) this quarter. The 131,000 sf Class A building is the former home to Alion Science and Technology Corporation who vacated the premises in early 2008. The Federal Bureau of Investigation (FBI) will be joining the Navy some time in the second quarter of 2012 and is expected to take 10,000 sf.
  • West Woods Business Park Building B, located at 180 Admiral Cochrane Drive, shuffled tenants as ITT Tech and Dental One vacated their space making room for Orbis Technology and Habitat America to move in. Both companies signed leases in the Fall of 2011.
  • After much controversy, Saint Agnes Hospital has agreed to purchase and redevelop neighboring historical property Cardinal Gibbons High School from the Archdiocese of Baltimore. Ideas for the development include recreational community space, an office building and housing for hospital and community residents.

Market Outlook

By Anirban Basu, Sage Policy Group

By and Large, First Quarter was a Non-Event for Local Office Market

The last twelve months have been solid ones for the Baltimore area economy. Despite the malaise that impacted the local economy in early and mid-2011, the region managed to add 21,200 jobs over a recent twelve-month period, outperforming both the state and nation in terms of the pace of job growth in the process. This performance was due at least in part to the impacts of base realignment, which is reflected in office market statistics.

During the first quarter of 2012, virtually all of the improvement in office market conditions was attributable to the southern metro region, which includes the base-realignment impacted BWI office submarket along with Columbia, Annapolis and the Route 2 Corridor. Net absorption totaled 232,717 square feet (sf) during the year's initial quarter, with direct vacancy remaining below 16 percent. Leading the way were BWI and Columbia, with 127,536 and 71,374 sf absorbed, respectively.

The balance of the Baltimore area marketplace was flat to declining. In the Northern metropolitan area, net absorption totaled less than 1,000 sf. The Towson submarket actually sustained -74,544 sf in terms of net absorption, but this was more than offset by the combined performance of the I-83 Corridor (+51,130 sf) and Baltimore County West (+35,000 sf).

Center City Baltimore remains highly resistant to improvement. Net absorption was negative for the first quarter (-88,743 sf), with Class B absorption totaling -113,508 sf. Class B vacancy with sublet is now north or 35 percent. At the same time, a recent report from the Downtown Partnership indicated a downtown apartment vacancy rate is less than 3 percent. The very strong implication is that the market is ripe for a conversion of Class B office space into apartments and several projects are now at various stages of planning.

In the balance of Baltimore City, net absorption totaled -55,242 sf. This performance has to be considered disappointing given that the economy is now in the midst of its third year of economic recovery. Direct City Center vacancy has risen from 21.2 percent a year ago to 21.8 percent more recently. Citywide, vacancy has expanded from 18.6 percent to 19.0 percent.

Suburban Baltimore should continue to progress. Though economic headwinds remain, sustainable private employment expansion can be anticipated, including in professional and business services, a major office-using employment category. However, job growth over the next twelve months may fall short of the most recent twelve-month period given the prospective absence of substantial base realignment-related impacts.

Notable Transactions
Lease

Location Submarket Tenant Amount Leased SF
849 Dulaney Valley Road Towson GSA 22,000 sf
100 S. Charles Street City Center Jacob's Engineering 20,050 sf
307 W. Baltimore Street City Center University of Maryland - Baltimore 11,000 sf

Sale

Location Submarket Price PSF Building Size SF
Prologis Portfolio (20 buildings) Columbia $80,750,000 $117.49 687,373 sf
The Village of Cross Keys Baltimore City North $26,000,000 $88.63 293,371 sf
COPT White Marsh Portfolio (5 buildings) Baltimore County East $19,200,000 $117.88 162,873 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 3/2012.