SOUTHEAST SNAPSHOT, MARCH 2006

Baltimore Industrial Market

The past year was one of the strongest in 10 years for Baltimore's industrial market. Due to its central location along the East Coast, Baltimore has become popular for large industrial users with distribution and warehouse needs. Investment sales activity has remained strong throughout Baltimore.  

The Baltimore metropolitan area witnessed 1.5 million square feet of delivered industrial space last year. This year, despite an almost 20 percent increase in construction costs, Baltimore is expected to reach 1.7 million square feet of delivered industrial space. Not included in those figures is the redevelopment of the 3 million-square-foot General Motors facility in Baltimore City. Most of the industrial development is taking place in the Baltimore-Washington, D.C. corridor as there is a demand for ideal locations between the two cities so owners can serve both markets from just one location.

The following are some of the recent industrial developments in Baltimore. Cabot Seefried of Seefried, Inc., a new developer to the region, developed a 139,000-square-foot build-to-suit for a Verizon Wireless call center. Merritt Properties, Liberty Property Trust and Lincoln Property Co. are developing the 1.2 million square-foot Patapsco Valley Business Center. Preston Partners is developing a four-building project called Preston Gateway Corporate Park with Phase I complete. Crossroads at 95 Business Park is a 1,000-acre park with research offices and distribution facilities. Big box users should be able to find developments options at Crossroads at 95 Business Park and in Harford and Cecil counties as well.  

The market has experienced a number of major sales recently. COPT Opportunity Invest purchased a 470,000-square-foot warehouse at 7468 Candlewood Rd. in Anne Arundel County for $39.87 per square foot. COPT will convert it into a Class A office property. First Industrial Realty Trust purchased 16 former Rouse Co. industrial and flex buildings, totaling 952,000 square feet, in Baltimore County from General Growth Properties for $59.87 per square foot. ProLogis purchased a 600,000-square-foot warehouse at 1701 Trimble Rd. in Harford County for $35.28 per square foot.

Average rental rates in Baltimore are $4.85 NNN with a total vacancy rate of 11.4 percent. While there are no major tenants filling a majority of industrial space at this time, Baltimore has witnessed more signed leases of more than 100,000 square feet this past year than in each of the previous 2 years. The Social Security Administration and Elite Spice have signed leases at Preston Gateway Corporate Park. Sephora USA has renewed and expanded its space to 316,524 square feet at 4622 Mercedes Dr. in Harford County. The Terminal Corp. renewed its 200,000-square-foot lease at 2010 Reservoir Rd. in Baltimore County. Henry Bath, Inc. leased 532,515 square feet at 2200 Broening Hwy. in Baltimore City.

Of course, Baltimore's industrial market is still uneven and geographically driven as some submarkets outperform others. Expect the Baltimore-Washington, D.C. corridor and Harford County to remain the core industrial distribution markets for the region. The Defense Base Realignment and Closure Act (BRAC) will significantly affect Anne Arundel and Howard counties by bringing more jobs and residents to the area, and in turn, creating more warehouse and distribution needs. These two counties should continue to see more industrial development and absorption this year and into the future. Carroll County is another growing area due to its strong workforce and lower rents. This submarket is ideal for companies that do not need immediate access to major distribution routes.

Industrial users will continue to look for ideal locations to both Baltimore and Washington, D.C. Baltimore is within a one-day drive to more than 35 percent of the major retail markets in the United States. Baltimore's port access along the East Coast also plays a factor in the health of the market. Although construction costs are significantly rising, Baltimore's industrial market has other factors keeping it strong.  

— Joseph Casey is senior vice president and Thomas Burns is vice president in the Baltimore office of Trammell Crow Company.


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