SOUTHEAST SNAPSHOT, MARCH 2008
Baltimore Industrial Market
The Industrial Market in the Baltimore area remains relatively strong; however, we are predicting a slight slowdown in leasing for 2008. The Baltimore market is located along the I-95 corridor extending from Cecil County (to the north) to Howard County (to the south). Superior infrastructure and close proximity to the Port of Baltimore and BWI Airport provide outstanding opportunities for industrial users in this market. The market comprises 2,500 industrial buildings totaling 176 million square feet. The current vacancy rate is 9.45 percent, which is considered stable in this area.
The most dramatic change in vacancy occurred in the northern submarket, (Harford/Cecil) where the vacancy rates reduced by 2 percent in 2007. Restoration Hardware leased 602,000 square feet, Rite Aid leased 264,000 square feet and China Products Exhibition and Exchange Center leased 345,000 square feet.
Net absorption for 2007 slightly exceeded the national average at 3.2 million square feet. Building deliveries amounted to 2.9 million square feet and average asking rents increased from $4.80 NNN per square foot to $5.31 NNN per square foot.
There were a number of notable industrial sales and leases in the fourth quarter of 2007. Preston Partners purchased an 517,000-square-foot industrial park on Trident Court in Baltimore County for $26.6 million ($51.35 per square foot). AMB purchased 100,000 square feet at 8310 Sherwick Court in Howard County for $7.9 million ($79.00 per square foot), TA Associates Realty bought 1915 Annapolis Road in Baltimore City, which is a 160,000 square foot multi-tenant building for $7.8 million ($48.48 per square foot), and High Street Equity Advisors purchased 1704 Trimble Road, a modern 105,000 square foot distribution building in Harford County for $7.2 million ($68.50 per square foot). The strength of these numbers indicates continued optimism regarding the long-term prospects of this area.
On the leasing front, Overflow Public Warehouse leased 300,000 square feet on O’Donnell Street in Baltimore City, Southern Sales and Services leased 180,000 square feet at 7595 Montevideo Road in Howard County and M&M Precast leased 88,000 square feet at 800 Red Toad Road in the Harford/Cecil submarket.
The Baltimore County East submarket has seen very little new construction over the past 10 years. However, the opening of the Route 43 extension north of Baltimore will bring increased competition and new tenants to this submarket. Baltimore Crossroads at 95 is a major project located along Route 43 and I-95. When complete, the project will offer more than 5,000,000 square feet of industrial, flex, office and retail space. New tenants who have recently signed leases include Alexander’s Mobility Services, a relocation, transportation and logistics company, which will occupy 100,000 square feet and BGE Home, a provider of heating, air conditioning, plumbing and electrical services, which will occupy 55,000 square feet.
This construction boom on the east side has carried over into the City of Baltimore with two projects by Rock Realty and Duke Realty: the groundbreaking of Hollander 95 Business Park, a 243,700-square-foot warehouse project and Chesapeake Commerce Park a 2.8 million-square-foot industrial park on the former GM site at the Port of Baltimore.
The Base Realignment and Closure (BRAC) is still a major contributor to the Baltimore metropolitan industrial market. According to Brigadier General Mike Hayes, USMC retired, Director, Office of Military and Federal Affairs, Maryland Department of Business and Economic Development, a large percentage of the new positions at the Aberdeen Proving Ground (in Harford County) are coming from federal and contractor organizations in Fort Monmouth New Jersey. At Fort Meade (Anne Arundel County) the issue is a bit more subtle, because a high percentage of the transferred positions are coming from Northern Virginia, and current employees have choices of residency. Developers are moving with caution to accommodate the expected growth from BRAC.
Overall, more than 3 million square feet is either under construction or proposed for 2008. Considering approximately 3.2 million square feet was absorbed in 2007, it will be interesting to see if a continuation of that leasing velocity is possible for 2008.
— Michael Spedden is vice president with Baltimore-based MacKenzie Commercial Real Estate Services LLC.
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