Map: Industrial Submarkets

• Verde Realty sold a 15 building portfolio early in the first quarter. Totaling 265 acres and 4,170,629 sf, the properties were purchased for $290,300,000. Of the 15, three were located in Maryland and only two in the Baltimore MSA; 7630 Gambrills Cove Road, a 380,000 sf Class A warehouse and 4622 Merecedes Drive, also a Class A warehouse. Both properties were 100 percent leased at the time of sale and are located in the greater Annapolis submarket.
• Prologis sold a 20 building portfolio comprised of both low-rise office and flex buildings for a total of $80,750,000 in January. Office Movers renewed its original 25,000 sf and expanded to 68,328 sf at 3636 Pennsy Drive in Landover. The local moving company has been a tenant at the 358,108 square foot industrial warehouse building on 20.5 acres since 2009.
• Newport Scientific, a manufacturer of high pressure products and equipment used by research labs and manufacturing plants throughout the world, signed a 16,000 sf lease at 8246 Sandy Court in Jessup, Maryland.

Local Warehouse Market Now on the Move

Relative to the office market, the pace of improvement in the local warehouse/industrial market has been far more profound. During the first quarter, net absorption totaled more than 1 million square feet (sf), with the Harford County submarket responsible for 92 percent of that total (+933,525 sf). The regional warehouse direct vacancy rate has declined from 9.8 percent a quarter ago to 8.8 percent during the most recent quarter. A year ago, direct vacancy was above 10 percent.

Accordingly, asking rents are on the rise. A year ago, the regional asking rent was $4.54 per square foot (psf). One year later that figure is up to $4.69 psf, with much of that increase (60 percent) taking place in the most recent quarter alone. Given current trends in industrial production, the broader economy and activity at the Port of Baltimore, the expectation is that this market will continue to solidify during the quarters ahead.

In the flex category, net absorption totaled -133,169 sf, with almost all of this negative absorption attributable to Annapolis (126,651 sf). Net absorption was also negative during the fourth quarter, though the leading culprit in that instance was Baltimore City. Direct flex space vacancy in the region is now up to 10.6 percent from the fourth quarter of last year when vacancy stood at 10.2 percent. That said, direct vacancy is still lower than the year-ago level of 10.8 percent. Flex space performance should gradually improve, along with the broader economy going forward.

Notable Transactions
Flex Lease

Flex Sale

Warehouse Lease

Warehouse Sale

(r) Renewal
(e) Renewal & Expansion

* 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.

Flex

Above: Overall Flex vacancy increased slightly from 10.18 percent in the fourth quarter 2011 to 10.56 percent. The I-97/Annapolis Corridor saw a significant drop in absorption as more than 125,000 sf returned to the market. This noticeable increase is, in part, attributed luxury manufacturer Niermann Weeks exiting their location at 760 Generals Highway.

Warehouse

Above:The BW Corridor and Harford/Cecil County submarkets saw negative absorption for second quarter, as did Baltimore City and the I-83 Corridor which both saw a drop after a fairly stable 2011.

Historical Vacancy Rates

Click on Graphs to Enlarge

Above:The overall vacancy rate dropped slightly to 9.14 percent thanks in part to warehouse space being removed from the market. Limited large blocks of warehouse space is expected to continue to drive this number down through the end of 2012.