SOUTHEAST SNAPSHOT, MARCH 2005

Suburban Baltimore Office Market

Because of its stable and friendly business climate, suburban Baltimore has attracted both national and international companies from a wide range of industries. As the diversity broadens and the number of people grows, the area will continue to enjoy even greater economic stability in 2005. That stability is due to the mix of businesses, which range from high technology and telecommunications to wholesale distributors and manufacturers. Keeping up with the defense industry’s demand for office space in the Southern Metro market can be challenging; in the Northern metro market, development of corporate campuses and office and flex space is strong.

While there are no major building trends in suburban Baltimore’s Northern Metro office market, precautions and pragmatism have led developers in suburban Baltimore’s Southern Metro market to strive for efficiency rather than aesthetics. High-tech and rounded buildings may be trendy, but they are becoming a thing of the past. Tenants recently have become much more interested in security measures; they are requiring security cameras, key card entrances or security guards. Therefore, in addition to practical purposes regarding space and parking efficiency, developers are catering to safety issues over aesthetically pleasing construction.

A majority of the area’s leasing activity is taking place in the Southern Metro market. In this area, the Baltimore-Washington corridor, the average asking rental rates are $19.64 per square foot. And while market vacancy reached a peak of 15.48 percent in 2002’s first quarter, the figure has fallen to 8.21 percent over 3 years, including a 3.87 percent drop since fourth quarter 2003. For example, The National Business Park in the BWI submarket is leasing space ahead of its construction. Its developer/owner, Corporate Office Properties Trust, already retains 1.5 million square feet in 13 buildings at 100 percent occupancy, yet it plans to keep pace with demand; currently under construction is a building that is already fully leased to Booz Allen Hamilton. Another defense company, the National Security Agency (NSA), is constructing build-to-suit buildings in order to house the 7,500 new workers it plans to employ. The corridor’s proximity to NASA and the NSA has helped keep demand strong in its submarkets.

In addition to the growing market around the NSA, significant developments are taking place all over the suburban Baltimore area, including The Baltimore Crossroads @ 95 county project. Bethesda, Maryland-based Somerset Construction Company and its partner, MIE Properties, are building up to 2.5 million square feet of office space, and First Industrial Realty Trust plans to build the same amount of space for manufacturing and industrial complexes. Baltimore Crossroads @ 95 expects to generate at least 10,000 new jobs, and in late 2005, construction is planned for 500,000 square feet of retail and two hotels once the extension of Route 43 is complete. The space hopes to draw technology, biotechnology and pharmaceutical companies because the extension of Route 43 provides easy access to Interstate 95, Baltimore/Washington International Airport and the Port of Baltimore, in addition to connecting White Marsh to the Middle River waterfront. This could be the last chance for major development in this region; there are no other 1,000 acres of raw land.

In Northern Metro Baltimore, vacancy is slowly gaining momentum. The rate currently stands at 13.41 percent, but expansion and development activities are becoming more popular in this region. For instance, Black & Decker has signed to expand into space at 101 Schilling Rd. in the Interstate 83 corridor and at 1220 B E. Joppa Rd. in the Towson submarket. Also noteworthy to mention is that in the second half of 2004, The St. Paul Companies moved its headquarters to 150,000 square feet in northern Baltimore County. Development progress has continued its build-to-suit activities, as Associated Administrators has leased 911 Ridgebrook Rd. prior to construction in The Highlands at Hunt Valley.

In Baltimore’s overall suburban office market, direct vacancy rates fell a total of 1.78 percent last year, a heavy descent from 12.75 percent in fourth quarter 2003 to 10.97 percent in fourth quarter 2004. With the rental rates at $17.95 per square foot in the Northern Metro area, the average between the Northern Metro and Southern Metro areas fell $.06 from fourth quarter 2003. The Baltimore Metro markets have a year-to-date total net absorption of 1.4 million square feet, and an additional 1.8 million square feet is currently under construction.

While there are no major developers that are new to the suburban Baltimore area, the defense industry continues to create a large demand for space in Southern Metro BWI and Columbia markets. The Northern Metro market continues to see growth in the Hunt Valley region, which houses more than 130 game development and technology companies. These types of businesses are the second largest industry sector in the region, including established names such as Breakaway, Firaxis Games and Big Huge Games.

Maple Lawn, the area south of Columbia, is a major hotbed for growth in the near future. A new 600-acre mixed-use development will feature more than 1.5 million square feet of new office development and 200,000 square feet of retail development. The first office building in the complex is not expected to be completed until this fall, yet the space is already 30 percent leased. Completion for this entire project in the Southern Metro market is not expected for 10 to 15 years. The sheer size of the planned complex testifies to the noticeable growth in the area. Despite limited space, Maple Lawn also provides excellent retail development opportunities along the Route 29 corridor.

— The following executives from MacKenzie Cushman and Wakefield contributed to this article: Scott Wimbrow, senior vice president and principal; Bill Whitty, senior vice president and principal; and Julio Purcell, vice president.


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